Political Pressure, Rhetoric and Monetary Policy

Political Pressure, Rhetoric and Monetary Policy, by Philipp Maier (Edward Elgar Publishing, Cheltenham), pp. 228.

There is now widespread consensus that monetary policy exerts a significant influence over national economies. Thus the United States Federal Reserve Chairman is universally regarded

as being (at least!) the second most influential actor in the US economy. The delegation by sovereign authority of such an important tool of policy making to central banks, with varying degrees of statutory independence, has given rise to a large literature regarding the measurement, existence, and effect of central bank independence. The issues raised in these studies are placed into sharper focus with the establishment of the European Central Bank (ECB) and the move to a European common currency.

Philipp Maier's fine book Political Pressure, Rhetoric and Monetary Policy is a welcome addition to this literature. The book's major focus is to empirically measure the extent to which political factors such as elections and government turnover, as well as other special interest groups, have influenced the German Central Bank's (the Deutsche Bundesbank) conduct of monetary policy. This question is clearly important since the major case for the ECB was that it would render monetary policy more apolitical. Since the Bundesbank is widely regarded as being one of the world's most independent Central Banks, it was the major blueprint for the ECB. The finding of significant political manipulation of post-war German monetary policy would weaken the case for the ECB as well as throw into question the relevance of many cross-national studies that have measured the economic impact of central bank independence.