The Politics of Monetary Policy
Alberto F. Alesina
Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
Board of Governors of the Federal Reserve System
Harvard Institute of Economic Research Discussion Paper No. 2183
In this paper we critically review the literature on the political economy of monetary policy, with an eye on the questions raised by the recent financial crisis. We begin with a discussion of rules versus discretion. We then examine the issue of Central Banks independence both in normal times, in times of crisis. Then we review the literature of electoral manipulation of policies. Finally we address international institutional issues concerning the feasibility, optimality and political sustainability of currency unions in which more than one country share the same currency. A brief review of the Euro experience concludes the paper.
Number of Pages in PDF File: 60
Date posted: March 24, 2010 ; Last revised: June 4, 2010