2002/01/01 by Kathleen R. McNamara · 5 citations
Economics, Econometrics and Finance · Social Sciences · #Economic Theory and Institutions #Corruption and Economic Development #Global Financial Crisis and Policies
paper · doi:10.1080/713601585
openalex publication_date 2002/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
The conventional wisdom in support of central bank independence rests on a series of contestable arguments about the relationship between democracy, policy making, and economic outcomes. Empirical work casts doubt on the severity of the inflationary problems purportedly solved by delegation to independent central banks, as well as raising questions about the linkages between delegation and superior economic outcomes. So why delegate? Theories of institutional isomorphism, or the copying of organisational models, provide an alternative sociological explanation of the diffusion of central bank independence. Drawing on this approach, it is argued that governments choose central bank independence because delegation has important legitimising and symbolic properties that are attractive to political leaders in times of economic uncertainty. Delegation to independent central banks is rational, efficient, and acceptable in a democratic society because of the cultural processes which define it as such, not because of the functional requirements of economic management.