The Redistributive Politics of Monetary Policy

42 Pages Posted: 10 Nov 2020

See all articles by Louis Rouanet

Louis Rouanet

George Mason University

Peter K. Hazlett

George Mason University, College of Humanities and Social Sciences, Department of Economics

Date Written: November 9, 2020

Abstract

Monetary policy and institutions are far from exempt from political influences. In this paper, we analyze monetary institutions not as being run by either benevolent technocrats or a wealth maximizing Leviathan but as being the outcome of competition between interest groups trying to capture wealth transfers. We argue that while interest groups gaining from specific monetary policies and institutions can easily identify themselves, losers often cannot. As a result, losers have a harder time fighting back and both the organization of money production and monetary policy are shaped by political competition between rent-seekers. We use our framework to analyze modern developments in monetary policies and institutions, namely 1) the Fed's reaction to the 2007 financial crisis, 2) the Fed's reaction to the COVID crisis, 3) the establishment and development of the Euro.

Keywords: Monetary policy, Public Choice

Suggested Citation

Rouanet, Louis and Hazlett, Peter, The Redistributive Politics of Monetary Policy (November 9, 2020). Available at SSRN: https://ssrn.com/abstract=3727543 or http://dx.doi.org/10.2139/ssrn.3727543

Louis Rouanet (Contact Author)

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

Peter Hazlett

George Mason University, College of Humanities and Social Sciences, Department of Economics ( email )

Fairfax, VA
United States

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