Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns
Autor(a) principal: | |
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Data de Publicação: | 2021 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Revista Brasileira de Economia (Online) |
Texto Completo: | http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402021000300300 |
Resumo: | Abstract Central bankers (CBs) decide on policies that affect the interests of three social groups: government politicians, financial market institutions and citizens. While it is desired that the monetary authority focuses primarily on maximizing the well-being of the latter group, it might divert from doing so in order to please the interests of the other two. This happens because CBs will eventually leave office, and they are aware that holding a good reputation among the members of the government and/or the market may be providential to boost their future career path. We provide a model that analyzes the strategic interaction between a CB (she) and her "three masters". Our findings show that the CB always implements a less favorable regulatory policy to the market when the governmental career is chosen. Monetary policy decisions, however, depend on her "future employer's" preferences: if the government gives a sufficiently low weight to the output, the CB implements a higher interest rate when she works on the government; if the financial market cares enough about inflation fighting, the monetary policy is more conservative when she goes to the financial industry. |
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Revista Brasileira de Economia (Online) |
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Serving three masters: Optimal monetary and regulatory policies when central bankers have career concernscentral bankagency theoryregulationmonetary policyAbstract Central bankers (CBs) decide on policies that affect the interests of three social groups: government politicians, financial market institutions and citizens. While it is desired that the monetary authority focuses primarily on maximizing the well-being of the latter group, it might divert from doing so in order to please the interests of the other two. This happens because CBs will eventually leave office, and they are aware that holding a good reputation among the members of the government and/or the market may be providential to boost their future career path. We provide a model that analyzes the strategic interaction between a CB (she) and her "three masters". Our findings show that the CB always implements a less favorable regulatory policy to the market when the governmental career is chosen. Monetary policy decisions, however, depend on her "future employer's" preferences: if the government gives a sufficiently low weight to the output, the CB implements a higher interest rate when she works on the government; if the financial market cares enough about inflation fighting, the monetary policy is more conservative when she goes to the financial industry.Fundação Getúlio Vargas2021-09-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersiontext/htmlhttp://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402021000300300Revista Brasileira de Economia v.75 n.3 2021reponame:Revista Brasileira de Economia (Online)instname:Fundação Getulio Vargas (FGV)instacron:FGV10.5935/0034-7140.20210014info:eu-repo/semantics/openAccessDAMO,ALEXANDRE F.GRIEBELER,MARCELO DE C.eng2021-12-16T00:00:00Zoai:scielo:S0034-71402021000300300Revistahttp://bibliotecadigital.fgv.br/ojs/index.php/rbe/issue/archivehttps://old.scielo.br/oai/scielo-oai.php||rbe@fgv.br1806-91340034-7140opendoar:2021-12-16T00:00Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV)false |
dc.title.none.fl_str_mv |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns |
title |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns |
spellingShingle |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns DAMO,ALEXANDRE F. central bank agency theory regulation monetary policy |
title_short |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns |
title_full |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns |
title_fullStr |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns |
title_full_unstemmed |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns |
title_sort |
Serving three masters: Optimal monetary and regulatory policies when central bankers have career concerns |
author |
DAMO,ALEXANDRE F. |
author_facet |
DAMO,ALEXANDRE F. GRIEBELER,MARCELO DE C. |
author_role |
author |
author2 |
GRIEBELER,MARCELO DE C. |
author2_role |
author |
dc.contributor.author.fl_str_mv |
DAMO,ALEXANDRE F. GRIEBELER,MARCELO DE C. |
dc.subject.por.fl_str_mv |
central bank agency theory regulation monetary policy |
topic |
central bank agency theory regulation monetary policy |
description |
Abstract Central bankers (CBs) decide on policies that affect the interests of three social groups: government politicians, financial market institutions and citizens. While it is desired that the monetary authority focuses primarily on maximizing the well-being of the latter group, it might divert from doing so in order to please the interests of the other two. This happens because CBs will eventually leave office, and they are aware that holding a good reputation among the members of the government and/or the market may be providential to boost their future career path. We provide a model that analyzes the strategic interaction between a CB (she) and her "three masters". Our findings show that the CB always implements a less favorable regulatory policy to the market when the governmental career is chosen. Monetary policy decisions, however, depend on her "future employer's" preferences: if the government gives a sufficiently low weight to the output, the CB implements a higher interest rate when she works on the government; if the financial market cares enough about inflation fighting, the monetary policy is more conservative when she goes to the financial industry. |
publishDate |
2021 |
dc.date.none.fl_str_mv |
2021-09-01 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402021000300300 |
url |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402021000300300 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
10.5935/0034-7140.20210014 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
text/html |
dc.publisher.none.fl_str_mv |
Fundação Getúlio Vargas |
publisher.none.fl_str_mv |
Fundação Getúlio Vargas |
dc.source.none.fl_str_mv |
Revista Brasileira de Economia v.75 n.3 2021 reponame:Revista Brasileira de Economia (Online) instname:Fundação Getulio Vargas (FGV) instacron:FGV |
instname_str |
Fundação Getulio Vargas (FGV) |
instacron_str |
FGV |
institution |
FGV |
reponame_str |
Revista Brasileira de Economia (Online) |
collection |
Revista Brasileira de Economia (Online) |
repository.name.fl_str_mv |
Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV) |
repository.mail.fl_str_mv |
||rbe@fgv.br |
_version_ |
1754115906169995264 |