Publication:
Does Central Bank Independence Increase Inequality?

dc.contributor.author Aklin, Michael
dc.contributor.author Kern, Andreas
dc.contributor.author Negre, Mario
dc.date.accessioned 2021-01-28T15:28:09Z
dc.date.available 2021-01-28T15:28:09Z
dc.date.issued 2021-01
dc.description.abstract Since the 1980s, income inequality has increased substantially in several countries. Yet the political logic that triggered rising inequality in some places but not in others remains poorly understood. This paper builds a theory that links central bank independence to these dynamics. It posits the existence of three mechanisms that tie central bank independence to inequality. First, central bank independence indirectly constrains fiscal policy and weakens a government's ability to engage in redistribution. Second, central bank independence incentivizes governments to deregulate financial markets, which generates a boom in asset values. These assets are predominantly in the hands of wealthier segments of the population. Third, to contain inflationary pressures, governments actively promote policies that weaken the bargaining power of workers. Together, these policies strengthen secular trends towards higher inequality according to standard indicators. Empirically, the analysis finds a strong relation between central bank independence and inequality, as well as support for each of the mechanisms. From a policy perspective, our findings contribute to knowledge on the undesirable side effects of central bank independence. en
dc.identifier http://documents.worldbank.org/curated/en/422091611242015974/Does-Central-Bank-Independence-Increase-Inequality
dc.identifier.uri http://hdl.handle.net/10986/35069
dc.language English
dc.publisher World Bank, Washington, DC
dc.relation.ispartofseries Policy Research Working Paper;No. 9522
dc.rights CC BY 3.0 IGO
dc.rights.holder World Bank
dc.rights.uri http://creativecommons.org/licenses/by/3.0/igo
dc.subject INEQUALITY
dc.subject CENTRAL BANK
dc.subject LABOR MARKET
dc.subject POVERTY
dc.subject FISCAL POLICY
dc.subject INCOME DISTRIBUTION
dc.subject FINANCIAL DEREGULATION
dc.subject MONETARY POLICY
dc.subject WAGES
dc.title Does Central Bank Independence Increase Inequality? en
dc.type Working Paper en
dc.type Document de travail fr
dc.type Documento de trabajo es
dspace.entity.type Publication
okr.date.disclosure 2021-01-21
okr.doctype Publications & Research
okr.doctype Publications & Research :: Policy Research Working Paper
okr.docurl http://documents.worldbank.org/curated/en/422091611242015974/Does-Central-Bank-Independence-Increase-Inequality
okr.identifier.doi 10.1596/1813-9450-9522
okr.identifier.externaldocumentum 090224b0881f3684_1_0
okr.identifier.internaldocumentum 32767726
okr.identifier.report WPS9522
okr.imported true en
okr.language.supported en
okr.pdfurl http://documents.worldbank.org/curated/en/422091611242015974/pdf/Does-Central-Bank-Independence-Increase-Inequality.pdf en
okr.statistics.combined 15105
okr.statistics.dr 422091611242015974
okr.statistics.drstats 13017
okr.topic Finance and Financial Sector Development :: Banks & Banking Reform
okr.topic Finance and Financial Sector Development :: Finance and Development
okr.topic Macroeconomics and Economic Growth :: Fiscal & Monetary Policy
okr.topic Poverty Reduction :: Inequality
okr.topic Public Sector Development :: Public Sector Expenditure Policy
okr.unit Poverty and Equity Global Practice
relation.isSeriesOfPublication 26e071dc-b0bf-409c-b982-df2970295c87
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