Central Banking and Supervision: The Political Cycle
28 Pages Posted: 7 Nov 2012
Date Written: November 1, 2012
Abstract
By the early ‘2000 an increasing numbers of countries had adopted a well defined central bank framework, which is characterized by two intertwined features: the authority becomes specialized in achieving the monetary policy goals, and consequently its traditional responsibilities in pursuing the financial stability are less important in its institutional perimeter. The fundamental effect was that the central bank involvement in supervision (CBS) generally decreased.
But then, after the Financial Crisis erupted in 2008, reforms are undertaken and projects are under discussion in order to reconsider the central bank role in the supervisory field. Therefore the main research question is: Why and how and is moving the CBS? This article offers two contributions. A political economy model explains the relationship between central banking and banking supervision. The theoretical framework is used to interpret the evolution of the CBS before and after the Crisis.
Keywords: central banking, monetary policy, banking supervision, financial crisis, central bank independence
JEL Classification: G18, G28, E50, E52, E58
Suggested Citation: Suggested Citation
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