Information, Party Politics, and Public Support for Central Bank Independence

Abstract

Why do citizens support central bank independence (CBI)? Despite important research on economic and political reasons to grant independence to central banks, we know little about what the public thinks about CBI. This is important given citizens' potential role in constraining politicians' ability to alter CBI. We hypothesize that support for CBI is influenced by citizens' limited understanding of central bank governance and their beliefs about who will gain control over monetary policy if independence is reduced. Our expectations are confirmed by a preregistered survey experiment and a pre-post-election test in the U.S. Support for CBI increases when respondents learn that the President would gain more influence if independence was reduced. This support decreases when respondents expect a co-partisan to lead the executive branch. These findings shed light on the legitimacy basis of monetary institutions in politically polarized contexts and, from a policy perspective, indicate the limits of central bank communication.

Keywords: Central Banks, Public Opinion, Survey Experiment, Central Bank Independence

JEL Classification: E58, H11, P16