Independent Agencies, Distribution, and Legitimacy: The Case of Central Banks

May combine two claims.

In practice, a substantive portion of the liquidity injected by unconventional monetary policy has been used to buy existing assets instead of stimulating investment and consumption, leading to booms on real estate and stock markets and to unintended distributive consequences.

“In practice, a substantive portion has been used to buy existing assets instead, thus leading to booms on real estate and stock markets and to unintended distributive consequences (e.g., De Haan and Eijffinger 2016; White 2012).”

• cites De Haan and Eijffinger 2016 sourcePartly supported

  Split into 2 atoms — 0 confirmed, 2 partially supported, 0 disputed, 0 misattributed, 0 unverifiable. Expand the claim to see per-atom verdicts.

  Experimental — accuracy not yet measured
• cites White 2012Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

• AssumptionRests on an assumption: Both quantitative easing and low-interest loan programs such as the ECB's LTROs have injected massive amounts of liquidity into the economy.

May combine two claims.

There is consensus in theory and practice that monetary policy faces commitment problems and that granting independence to the monetary policy authority can help overcome them with the right institutional design.

“there is consensus in theory and practice that monetary policy faces commitment problems and that granting independence to the monetary policy authority can help overcome them with the right institutional design (see Keefer and Stasavage 2003).”

• cites Keefer and Stasavage 2003 sourceSupported

Probably not a substantial claim: may not pass S3 (load-bearing).

The literature identifies up to six channels of redistribution of monetary policy.

“Although the literature identifies up to six such channels (e.g., Colciago, Samarina, and de Haan 2019, 5;Coibion et al., 2017, 81-5), what matters for our purposes is the distinction between two kinds of effects monetary policy has on distribution.”

• cites Colciago, Samarina, and de Haan 2019 sourceSupported
• cites Coibion et al. 2017Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S2 (checkable).

Applied to monetary policy, a justification beyond efficiency is required for handing independent central banks the power to print money, influence interest rates, and via inflation effectively tax economic agents.

“Applied to the context of monetary policy, a justification that goes beyond the kind of efficiency-considerations discussed above is required for handing independent central banks the power to print money, influence interest rates, and-via inflation-effectively tax economic agents.”

Classified as probably not a substantial claim.

Tucker's key precondition for IA legitimacy is that the agency does not take big choices on distributional trade-offs.

“According to Tucker, a key precondition for IA legitimacy is that the agency does not take big choices on distributional trade-offs.”

• cites Tucker 2018Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S4 (based). May combine two claims.

Given contemporary monetary policy has significant distributive consequences, either we refrain from delegating monetary policy to an IA, risking higher than necessary inflation, or we delegate anyway, violate Tucker's delegation criteria, and risk a monetary policy authority that lacks legitimacy.

“Given that contemporary monetary policy has significant distributive consequences, 4 we either have to refrain from delegating monetary policy to an IA, thus risking higher than necessary inflation, or we have to delegate anyway, violate Tucker's delegation criteria, and risk a monetary policy authority that lacks legitimacy.”

• AssumptionThe authors state this as an assumption: We are dealing with a policy area where delegation to an independent agency is efficient, as is plausibly the case in monetary policy.

Probably not a substantial claim: may not pass S2 (checkable), S4 (based).

For equal levels of coerciveness, an independent agency needs to answer to a higher standard of justification compared with elected officials, due to its independence.

“Intuitively, for equal levels of coerciveness, an IA will need to answer to a higher standard of justification compared with elected officials, due to its independence.”

Probably not a substantial claim: may not pass S2 (checkable).

A system of checks and balances is needed to ensure that an independent agency does not abuse its power and remains sensitive to political preferences despite not being up for reelection.

“In other words, a system of checks and balances is needed to ensure that the IA does not abuse its power and remains sensitive to the political preferences of the population despite not being up for reelection.”

Probably not a substantial claim: may not pass S2 (checkable).

For a political body to be legitimate, it needs to provide a justification of the coercive political power it exercises over citizens.

“For a political body, independent or not, to be legitimate, it needs to provide a justification of the coercive political power it exercises over citizens (cf.Peter 2017).”

• cites Peter 2017Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S1 (asserted), S3 (load-bearing). May combine two claims.

Several central banks have recently published articles suggesting that the overall distributive effect of their crisis response has not exacerbated inequalities and has potentially even had an equalizing effect.

“Third, several central banks have recently published articles that suggest the overall distributive effect of their crisis response has not exacerbated inequalities and has potentially even had an equalizing effect (Ampudia et al. 2018;Bunn, Pugh, and Yeates 2018).”

• cites Ampudia et al. 2018Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

• cites Bunn, Pugh, and Yeates 2018Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

For a central bank to be considered independent, those running it need job security, and the agency needs control over policy instruments and some autonomy in determining its budget.

“For an agency such as a central bank to be considered independent, several conditions need to be fulfilled.Those running the agency need to have job security, and the agency needs to have control over policy instruments as well as some autonomy in determining its budget (Tucker 2018, 11).”

• cites Tucker 2018Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Classified as probably not a substantial claim. May combine two claims.

The rationale for Tucker's constraint is that decisions that create winners and losers need to be subject to democratic control and should not be removed from elected officials; IAs lack legitimacy on such issues.

“The rationale for this constraint is that decisions that create winners and losers need to be subject to democratic control and, thus, should not be removed from elected officials.IAs lack legitimacy on such issues.”

• cites Tucker 2018Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing).

Even beyond monetary policy, the distributive dimensions of regulation are often neglected.

“Even beyond monetary policy, the distributive dimensions of regulation are often neglected (see Robinson, Hammitt, and Zeckhauser 2016), though considering other policy fields in any depth lies beyond the scope of this letter.”

• cites Robinson, Hammitt, and Zeckhauser 2016 sourceNot checked — no full text of the source

Probably not a substantial claim: may not pass S2 (checkable), S4 (based).

The previous section demonstrated this assumption to be problematic when it comes to contemporary monetary policy.

“The previous section has demonstrated this assumption to be problematic when it comes to contemporary monetary policy.”

Probably not a substantial claim: may not pass S3 (load-bearing).

It can be argued that central bankers did not give serious consideration to ostensibly less inegalitarian policy alternatives, such as helicopter money.

“First, it can indeed be argued (e.g., Fontan, Claveau, and Dietsch 2016, 336-7) that central bankers did not give serious consideration to ostensibly less inegalitarian policy alternatives, such as for instance helicopter money (e.g., Blyth and Lonergan 2014).”

• cites Fontan, Claveau, and Dietsch 2016 sourceNot checked — no full text of the source
• cites Blyth and Lonergan 2014Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

The third response by central bankers ignores the relevant counterfactual: pointing out that things could have been worse in terms of inequality had central banks done nothing does not establish that things could not have been better in terms of inequality without prejudice to price stability, or achieved a better compromise between the two objectives, had they acted differently.

“The third response by central bankers ignores this relevant counterfactual.Pointing out that things could have been worse in terms of inequality had central banks done nothing does not establish that things could not have been better in terms of inequality without prejudice to price stability, or achieved a better compromise between the two objectives, had they acted differently.”

Probably not a substantial claim: may not pass S2 (checkable), S4 (based).

Various institutional design options are available to either mitigate the distributive side effects of monetary policy or to extend the political control over this aspect of central banks' actions.

“In the case of central banks, various institutional design options are available to either mitigate the distributive side effects of monetary policy or to extend the political control over this aspect of central banks' actions.”

Classified as probably not a substantial claim.

Central bankers argue that the inegalitarian direct effects of unconventional monetary policy on asset prices are compensated, or even outweighed, by the egalitarian indirect effects on employment and growth.

“Based on this distinction, central bankers argue that the inegalitarian direct effects of unconventional monetary policy on asset prices (see above) are compensated, or even outweighed by the egalitarian indirect effects on employment and growth.”