The Limits of Delegation: Veto Players, Central Bank Independence, and the Credibility of Monetary Policy

Philip Keeper, David Stasavage

Research output: Contribution to journalArticle

Abstract

Governments unable to make credible promises hinder economic development and effective policymaking. Scholars have focused considerable attention on checks and balances and the delegation of authority to independent agencies as institutional solutions to this problem. The political conditions under which these institutions enhance credibility, rather than policy stability, are still unclear, however. We show that checks-multiple veto players-enhance credibility, depending on the extent of uncertainty about the location of the status quo, on how agenda control is allocated among the veto players, and on whether veto players have delegated policymaking authority to independent agencies. In the context of monetary policy and independent central banks, we find evidence supporting the following predictions: Delegation is more likely to enhance credibility and political replacements of central bank governors are less likely in the presence of multiple political veto players; this effect increases with the polarization of veto players.

Original languageEnglish (US)
Pages (from-to)407-423
Number of pages17
JournalAmerican Political Science Review
Volume97
Issue number3
DOIs
StatePublished - Aug 2003

ASJC Scopus subject areas

  • Sociology and Political Science
  • Political Science and International Relations

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