Median Voter Preferences, Central Bank Independence and Conservatism
In: Public choice, Band 105, Heft 3-4, S. 323-338
ISSN: 0048-5829
This paper studies how the independence & the conservatism of a central bank relate to the structure & stability of median voter preferences. This is done by means of a model of endogenous delegation where an opportunistic policymaker chooses the monetary regime (independence & conservatism) to maximize the welfare of the median voter. The results show that a high degree of inflation aversion of monetary policy is not necessarily associated with a high degree of central bank independence. A high & stable degree of inflation aversion of society (ie, of the median voter) may lead to establishing a dependent central bank that is highly inflation averse. This suggests that the negative correlation between inflation & central bank independence indices detected by several empirical studies may reflect a link between inflation & some deep features of social preferences. 1 Table, 1 Appendix, 22 References. Adapted from the source document.