Hostname: page-component-745bb68f8f-v2bm5 Total loading time: 0 Render date: 2025-02-11T07:14:44.102Z Has data issue: false hasContentIssue false

Putting Monetary Policy in its Political Place

Published online by Cambridge University Press:  28 October 2002

Richard Rose
Affiliation:
Public Policy, University of Strathclyde
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

Even though a central bank has formal independence, the success of its actions are part of an interdependent system of policies in which elected governments have a role too. In the making of monetary policy, economists have technical expertise but politicians claim electoral legitimacy. This paper examines monetary policy from the perspective of elected officeholders who must balance non-economic pressures, both domestic and international, against concerns of central bankers with monetary constraint. It emphasizes divisions within national governments about how that balance should be struck, and differences in political priorities for economic policymaking between countries and across time. It concludes with a POP (Politically Optimal Policy), having flexibility between multiple and shifting policy goals rather than fixing on a single target, monetary or non-monetary.

Type
Research Article
Copyright
© 2002 Cambridge University Press