Independent or lonely? Central banking in crisis

Mabbett, Deborah and Schelkle, Waltraud ORCID: 0000-0003-4127-107X (2019) Independent or lonely? Central banking in crisis. Review of International Political Economy, 26 (3). 436 - 460. ISSN 0969-2290

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Abstract

The financial crisis has called our understanding of central bank independence (CBI) into question. Central banks were praised for bold interventions but simultaneously criticized for overreaching their mandates. Central bankers themselves have complained that they are ‘the only game in town’. We develop the second generation theory of CBI to understand how independence can turn into loneliness when a financial crisis calls for cooperation between fiscal authorities and the central bank. Central banks are protected from interference when there are multiple political veto-players, but the latter can also block cooperation. Furthermore, central banks in multi-veto-player systems operate under legal constraints on their financial stabilization actions. They can circumvent these constraints, but this invites criticism and retribution. More surprisingly, central banks have strategically invoked their constraints to gain cooperation from political authorities.

Item Type:	Article
Official URL:	https://www.tandfonline.com/toc/rrip20/current
Additional Information:	© 2019 Informa UK Limited, trading as Taylor & Francis Group
Divisions:	European Institute
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions
JEL classification:	E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
Date Deposited:	28 Nov 2018 16:51
Last Modified:	21 Sep 2024 22:30
URI:	http://eprints.lse.ac.uk/id/eprint/90879

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