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The Political Economy of Monetary Institutions

Published online by Cambridge University Press:  09 July 2003

William Bernhard ,
J. Lawrence Broz  and
William Roberts Clark
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Abstract

In recent decades, countries have experimented with a variety of monetary institutions, including alternative exchange-rate arrangements and different levels of central bank independence. Political economists have analyzed the choice of these institutions, emphasizing their role in resolving both the time-inconsistency problem and dilemmas created by an open economy. This “first-generation” work, however, suffers from a central limitation: it studies exchange-rate regimes and central bank institutions in isolation from one another without investigating how one monetary institution affects the costs and benefits of the other. By contrast, the contributors to this volume analyze the choice of exchange-rate regime and central bank independence together and, in so doing, present a “second generation” of research on the determinants of monetary institutions. The articles incorporate both economic and political factors in explaining the choice of monetary institutions, investigating how political institutions, democratic processes, political party competition, and interest group pressures affect the balance between economic and distributional policy objectives.

Type
Research Article
Information
International Organization , Volume 56 , Issue 4 , Autumn 2002 , pp. 693 - 723
Copyright
Copyright © The IO Foundation 2002

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