Non-benevolent central banks

Arbeitspapier

Corruption at central banks induces distorted policies by generating a tendency to increase inflation. An inflation bias arises because the public distrusts central bank's benevolence, not only its commitments. We show that distrust among the public, measured by a high level of expected inflation, can have positive effects because it may sanction a conservative central banker, forcing him to lower realized inflation levels. Giving central banks a high level of independence will fail if this not only insulates central bankers from troublesome political interference but also provides them with the leeway necessary to carry out corrupt transactions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: cege Discussion Papers ; No. 16

Classification and Topics

• Classification: Wirtschaft ; Illegal Behavior and the Enforcement of Law
• Subject: Corruption ; central banks ; time-inconsistency ; inflation bias ; seignorage ; central bank independence

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lambsdorff, Johann ; Schinke, Michael
• Event: Veröffentlichung
• (who): University of Göttingen, Center for European, Governance and Economic Development Research (cege)
• (where): Göttingen
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/32014
• Last update: 10.03.2025, 11:45 AM CET