Monday, January 25, 2010

Politics, populism, and central bankers

The Wall St. Journal reports on recent turmoil surrounding Argentina's central bank, which apparently has to do with the Argentine President's plan to use currency reserves to repay debt rather than defend the peso, which was devalued in 2002. Meanwhile, in this country, Ben Bernanke faces opposition to his reappointment as chair, and the Journal article refers to similar issues in Korea and Japan.

Plenty of academic research suggests that central bank independence is associated with lower inflation and better economic performance. But there's less information about the optimal shape of bank bailouts, and there is no practical way to run a real experiment with different central bankers, which might be more convincing to laypeople.