Working Paper: CEPR ID: DP5155
Authors: Hans Gersbach; Volker Hahn
Abstract: We examine whether the central bank council of a monetary union should publish its voting records when members are appointed by national politicians. We show that the publication of voting records lowers overall welfare if the private benefits of holding office are sufficiently low. High private benefits of central bankers lower overall welfare under opacity, as they induce European central bankers to care more about being re-appointed than about beneficial policy outcomes. We show that opacity and low private benefits jointly guarantee the optimal welfare level. Moreover, we suggest that non-renewable terms for national central bankers and delegating the appointment of all council members to a European agency would be desirable.
Keywords: Central banks; Transparency; Voting
JEL Codes: D70; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| publication of voting records (K16) | lower overall welfare (D69) |
| high private benefits (H42) | prioritize reappointment over beneficial policy outcomes (D72) |
| prioritize reappointment over beneficial policy outcomes (D72) | lower overall welfare (D69) |
| opacity and low private benefits (H49) | optimal welfare level (D69) |
| high wages (J31) | destroy incentives for central bankers to behave optimally from a European perspective (E58) |
| setting wages for central bankers at a European level (E64) | mitigate national governments' influence (H10) |
| introduction of term limits for national central bank council members (E58) | better welfare outcomes (I30) |
| appointment of all central bankers by a European authority (E58) | better welfare outcomes (I30) |
| high private benefits (H42) | detrimental focus on reappointment rather than policy outcomes (D72) |
| low wages and opacity (J46) | increase overall welfare (D69) |