THE THEORY of career-based monetary policy suggests testable implications for central banker preferences, policy decisions and outcomes, and the hiring and hiring of central bankers. In this chapter, I focus on the simplest empirical implication: monetary policy should be more anti-inflationary in the hands of financial sector types than government bureaucrats. Starting with inflation makes sense: inflation control is the ostensible object of monetary policy, and inflation is the outcome most widely measured over a broad array of countries and periods. I find that central bankers' careers not only influence the inflation rate, but that this effect can be split, using contextual clues, into a likely combination of career incentives and socialized preferences.

Measuring Career Effects

In developing measures of central bankers' careers, the first choice is whether to focus on what central bankers did before joining the central bank's board, or what they did after. There are theoretical, empirical, and practical reasons to concentrate on measures based on past career experience. Prior experience provides the context in which career socialization takes place and should therefore be a good measure to test the socialization hypothesis. But prior careers are important for incentives as well, because experience provides the specialized knowledge and social networks that are the foundation of job-for-policy exchanges. Choosing to work in a sector also reveals preferred career rewards, and I show in the following that earlier work in a sector also strongly predicts post-central bank career patterns.