After Delegation: Central Banks and the Politicization of Technocracy

• In Event: New Perspectives on Central Banking

Abstract

Since the global financial crisis, central banks have intervened in the economy on an unprecedented scale. In particular, large-scale asset purchases (‘QE’) have dramatically increased the distributive consequences of monetary policy, notably via their effect on asset prices and the exchange rate. As a result, the legitimacy of monetary policy has come under attack from various quarters. Drawing on theories of technocratic legitimacy, we hypothesize that exposure to public scrutiny and criticism draws formally independent technocrats (back) into politics. The paper operationalizes politicization – a concept notoriously difficult to measure – as the quantity of central bank communication on a range of topics that have emerged as particularly sensitive in the context of QE. In order to test the effect of an active QE program on politicization, we exploit the fact that while the effects of QE are felt globally, only five central banks conducted QE programs (Fed, Bank of England, Bank of Japan, Sveriges Riksbank, ECB). This allows us to use a difference-in-difference model to test the hypothesis that an active QE program increases politicization. We construct a panel dataset that includes all publicly available speeches of 20 central banks (5 QE, 15 non-QE) for the period 2000 through 2017. We measure the quantity of communication on various topics via a dictionary-based text mining approach. Controlling for various economic and institutional factors, we find that a an active QE program has a significant positive affect on central bank politicization regarding house prices, inequality, macroprudential regulation, and climate change. The results are robust to changes in the methods of dictionary construction and text classification.

Authors

• Benjamin Braun, Max Planck Institute for the Study of Societies

• Maximilian Gustav-Adolf Düsterhöft, Technische Universität Dresden