Central Banks as Political Players: Against the Mainstream

10 Pages Posted: 12 May 2010

Date Written: April 1, 2010

Abstract

One of the most widely supported arguments against attributing supervision functions to a central bank is based on the conflict of interest hypothesis.

However, in some circumstances, financial supervision enhances central bank’s independence. In fact, when a central bank is goal independent, it acts as a political player: in this context this institution can strengthen its independence by widening its constituency. Financial supervision is a means through which central bank can gain the support of commercial banks. These last ones have interest to give their support in exchange for favourable measures of financial regulation.

Keywords: Supervision, Monetary policy, Economic Policy

JEL Classification: G28, E58

Suggested Citation

Pittaluga, Giovanni Battista and Seghezza, Elena, Central Banks as Political Players: Against the Mainstream (April 1, 2010). Bancaria Special Issue No. 03-2010, Available at SSRN: https://ssrn.com/abstract=1603788

Giovanni Battista Pittaluga (Contact Author)

affiliation not provided to SSRN ( email )

Elena Seghezza

Universite de Geneve

PO Box 136
Geneva, CH-1211
Switzerland