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Independent Agencies, Distribution, and Legitimacy: The Case of Central Banks

Published online by Cambridge University Press:  23 December 2019

PETER DIETSCH Open the ORCID record for PETER DIETSCH [Opens in a new window]
PETER DIETSCH*
Affiliation:
Université de Montréal
*
*Peter Dietsch, Professor, Département de Philosophie, Université de Montréal, [email protected].
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Abstract

Delegation to independent agencies can reap real benefits for policy-making. In the case of monetary policy, it shores up the credibility of the central bank. However, the discretion of IAs needs to be constrained to ensure their legitimacy. This letter focuses on one potential constraint, namely, the idea that IAs should not make choices on distributional trade-offs. Given that monetary policy today has significant distributive consequences, if this constraint were respected, the independence of central banks would have to be repealed. This would be just as undesirable as a monetary policy whose distributive consequences remain unchecked. Instead, this letter encourages the search for alternative solutions and puts forward three possible institutional arrangements to manage the tension between the distributive consequences of monetary policy on the one hand and central bank legitimacy on the other.

Type
Letter
Information
American Political Science Review , Volume 114 , Issue 2 , May 2020 , pp. 591 - 595
Copyright
Copyright © American Political Science Association 2019 

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Footnotes

Thank you to two anonymous referees for their helpful comments, as well as to François Claveau and Clément Fontan for many discussions on the ethical dimensions of monetary policy.

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