A Structuralist Theory of Central Bank Independence

11 Pages Posted: 7 May 2006 Last revised: 18 Oct 2014

See all articles by Eduardo Zambrano

Eduardo Zambrano

California State Polytechnic University, San Luis Obispo - Economics

Date Written: October 3, 2014

Abstract

Can a heterodox economist find arguments in favor of Central Bank independence? Economists currently favor arguments in favor of Central Bank independence based on Barro-Gordon (1983 a,b), a very ‘orthodox’ model. Consequently, those who view the economic orthodoxy with suspicion tend to question Central Bank independence. I argue that Central Bank independence can be beneficial even in a very ‘structuralist’ economy: one in which workers are unionized, firms are cartelized and inflation arises as the result of distributive struggles among capitalists and workers. This is so because it is the time-inconsistency issue, and not the structure of the economy, that which generates the inflation bias that Central Bank independence is set to eliminate.

Keywords: Central Bank Independence, Inflation Bias, Structuralist Theories of Inflation, Distributive Struggles.

JEL Classification: E58, E61, E11

Suggested Citation

Zambrano, Eduardo, A Structuralist Theory of Central Bank Independence (October 3, 2014). Available at SSRN: https://ssrn.com/abstract=899379 or http://dx.doi.org/10.2139/ssrn.899379

Eduardo Zambrano (Contact Author)

California State Polytechnic University, San Luis Obispo - Economics ( email )

Orfalea College of Business
San Luis Obispo, CA 93407
United States
805-756-5327 (Phone)
805-756-1473 (Fax)

HOME PAGE: http://calpoly.edu/~ezambran

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