Governing the Governors: A Clinical Study of Central Banks

Riksbank Research Paper Series No. 54

Riksbank Working Paper Series No. 221

52 Pages Posted: 4 Mar 2007

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

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

Multiple version iconThere are 2 versions of this paper

Date Written: April 8, 2009

Abstract

We study the specific corporate governance problems of central banks in their complex role of inflation guardians, bankers' banks, financial industry regulators/supervisors and, in some cases, competition authorities and deposit insurance agencies. We review the current institutional arrangements of a number of central banks, e.g. formal objectives, ownership, board and governor appointment rules, term limits and compensation, using both existing surveys and newly collected information. Research on central bank governance appears to have focused almost only on their monetary policy task. As shown by the sub-prime loan market turmoil, central banks play a crucial role in financial markets not only in setting monetary policy, but also in ensuring their stability. In this paper, we contrast the current governance practices at central banks with the structures suggested in the corporate governance literature. Our analysis highlights a number of specific issues that appear to have been unsatisfactorily addressed by existing research, such as the incentive structure for governors and board members, the balance between central banks' multiple objectives and the need for term limits.

Keywords: accountability, bank regulation, board structure, central banks, corporate governance, central bank independence, governor remuneration, term limits

JEL Classification: G18, G34, G38, E58

Suggested Citation

Frisell, Lars and Roszbach, Kasper F. and Spagnolo, Giancarlo, Governing the Governors: A Clinical Study of Central Banks (April 8, 2009). Riksbank Research Paper Series No. 54, Riksbank Working Paper Series No. 221 , Available at SSRN: https://ssrn.com/abstract=967357 or http://dx.doi.org/10.2139/ssrn.967357

Lars Frisell

Sveriges Riksbank ( email )

S-103 37 Stockholm
Sweden

Kasper F. Roszbach (Contact Author)

Norges Bank - Research Department ( email )

P.O. Box 1179
Oslo, N-0107
Norway

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

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

HOME PAGE: http://www.rug.nl/staff/k.f.roszbach/

Giancarlo Spagnolo

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

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