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Political Pressure, Rhetoric and Monetary Policy
Lessons for the European Central Bank
Philipp Maier offers a unique examination of the extent to which governments and various interest groups have exerted pressure on central banks. The book looks in particular at the Deutsche Bundesbank - which acted as the blueprint for the European Central Bank (ECB) - and utilises an original set of indicators to measure external pressure and support from the government and other institutions. The author demonstrates that although some of the rhetoric of the Bundesbank may have been a response to political pressure, the operation and conduct of German monetary policy has not been influenced. The role of various pressure groups remains a more contentious issue, as there is evidence that the Bundesbank may have acted to appease the financial sector. The author also finds that a high degree of public support towards the Bundesbank has helped to mitigate the effect of external forces. As the ECB was closely modelled on its German counterpart, the author is able to extend his analysis to the European level and draw out explicit predictions for the ECB.
He argues that external pressure is unlikely to influence the conduct of monetary policy, as it will be less efficient and organised, and public support is likely to be high. In the future, however, this could be jeopardised by a rapid enlargement of EMU which may result in more concentrated and powerful pressure groups. This interesting empirical study of the effect of governments, interest groups and public support on the behaviour and rhetoric of Central Banks will be welcomed by financial and monetary economists, students and scholars of European finance and European policymakers.
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What Reviewers Are Saying
'This book is a must-read for serious students and scholars of monetary institutions. It is comprehensive in its coverage of the relevant issues that arise in testing political economy theories of central banking, and is rich with ideas for testing possible political influences on central banks across the globe.' -- Michelle R. Garfinkel, Public Choice 'By empirically analysing the rhetoric and decisions of the "most independent central bank in the world", Philipp Maier provides a fresh perspective on the eternal triangle of government, the financial sector and monetary authority. Maier's findings regarding the actual independence of the Bundesbank's monetary policy do not only provide a better explanation of the past. Equally important are the author's innovative analyses which provide a greater understanding of the future prospects and challenges for the European Central Bank, at a time when Europe's key monetary institution faces the impact of a broadening EMU.' -- Peter A.G. van Bergeijk, Netherlands Competition Authority, The Netherlands