Governing the Governors: A Clinical Study of Central Banks

51 Pages Posted: 20 Aug 2008

See all articles by Lars Frisell

Lars Frisell

Sveriges Riksbank

Kasper Roszbach

Norges Bank - Research Department; University of Groningen - Faculty of Economics and Business

Giancarlo Spagnolo

University of Rome Tor Vergata; EIEF; Centre for Economic Policy Research (CEPR); Stockholm School of Economics (SITE)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2008


Recent research on central bank governance has focused mainly on their monetary policy task. As the sub-prime loan market turmoil reminded us - central banks play a crucial role in financial markets not only in setting monetary policy, but also in ensuring their soundness and stability. In this paper we study the specific corporate governance structures of a number of central banks in light of their complex role of inflation guardians, bankers' banks, financial industry regulators/supervisors and, in some cases, competition authorities and deposit insurance agencies. We review their current institutional arrangements, e.g. formal objectives, ownership, board and governor appointment rules, term limits and compensation, using both existing surveys and newly collected information; and we contrast them with the structures suggested in the corporate and public governance literatures, where present. Our analysis highlights a striking variety in central bank governance structures and a number of specific issues that appear unsatisfactorily addressed by existing research, including the incentive structure for governor and board members, the balance between central banks' multiple objectives, and the need for term limits or post-employment restrictions.

Keywords: accountability, bank regulation, board structure, central bank independence, central banks, cooling-off periods, governance, governor remuneration, regulatory capture, term limits

JEL Classification: E58, G18, G34, G38

Suggested Citation

Frisell, Lars and Roszbach, Kasper F. and Spagnolo, Giancarlo, Governing the Governors: A Clinical Study of Central Banks (June 2008). CEPR Discussion Paper No. DP6888, Available at SSRN:

Lars Frisell

Sveriges Riksbank ( email )

S-103 37 Stockholm

Kasper F. Roszbach

Norges Bank - Research Department ( email )

P.O. Box 1179
Oslo, N-0107

University of Groningen - Faculty of Economics and Business ( email )

Department of Economics, Econometrics and Finance
Nettelbosje 2
Groningen, NL 9747 AE


Giancarlo Spagnolo (Contact Author)

University of Rome Tor Vergata ( email )

Faculty of Economics - DEF
Via Columbia 2
Rome, RM 00133

EIEF ( email )

Via Due Macelli, 73
Rome, 00187


Centre for Economic Policy Research (CEPR)

United Kingdom

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501

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