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Presidential inuence Inuence on Congress
Appoints chairperson although terms are not concurrent Should the Fed Be Independent? The Case for Independence The strongest argument for an independent central bank rests
on the view that subjecting It to more political pressures would
impart an inationary bias to monetary policy
The Case Against Independence Proponents of a Fed under the control of the president or
Congress argue that it is undemocratic to have monetary
policy (which aects almost everyone in the economy)
controlled by an elite group that is responsible to no one The Case for Independence Political pressure would impart an inationary bias to
Political business cycle
Could be used to facilitate Treasury nancing of large budget
Too important to leave to politiciansthe principal-agent
problem is worse for politicians The Case Against Independence Undemocratic
Dicult to coordinate scal and monetary policy
Has not used its independence successfully Explaining Central Bank Behavior One view of government bureaucratic behavior is that
bureaucracies serve the public interest (this is the public
interest view). Yet some economists have developed a theory
of bureaucratic behavi...
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This document was uploaded on 04/03/2014 for the course ECON 029 at Lehigh University .
- Spring '10