Adenauer, Konrad, 81
Alford index, 87–88, 91, 93, 202–3
Amsterdam Treaty, 166
Andreotti, Giulio, 131
Australia, 3
backbench legislators, 10–12, 37, 40, 42–44, 74–78, 107, 128, 199
Baffi, Paolo, 128
Balladur, Edouard, 27
Bank of Commerce and Credit International (BCCI) scandal, 144
Bank deutscher Lander (BdL), 80–81
Bank of England, 2, 6–7, 14, 22, 24–25, 97, 126
independence blocked, 143–45
institutional changes, 145–47
nationalization of, 83–86
1997 reform, 147–51
reform debates, 151–53
Bank of England bill (1946), 84–86
Bank of Italy, 2, 22, 25–26, 127, 130, 132
“divorce” of, 2, 14, 25, 125–26, 128, 134–35
evaluating reform, 136–37
Bank of the Netherlands, 48
Basle-Nyborg agreement, 168
Blugden, Nicholas, 144
Bollen, Kenneth, 93
Boothby, Robert, 86
Bretton Woods system, 5, 124, 129, 158
Britain. See also Bank of England
Bank of England bill (1946), 84–86
conflict over EMS entry, 141–43
Conservative party, 83–86, 137, 139–41
European Monetary System (EMS), 141–43, 157, 164
Keynesian demand management, 138, 140–41
Labour Party, 6–7, 14, 25,83–86, 106, 125–26, 137–39, 147–51
Medium Term Financial Strategy (MTFS), 139, 141
pound crisis, 138
Thatcher government and Tory “wets,” 139–41
Trade Unions Congress (TUC), 138–39
Westminster political system, 83, 145
Brown, Gordon, 148–49
budget cuts, 21
budget deficits, 103
Bundesbank. See German Bundesbank
Bundesrat, 81–83
bureaucratic delegation, 33–34
cabinet, 1, 37,40–41, 74–78, 199
central bank independence and, 11–12
informational advantages of, 41–42
informational checks on, 43–45
monetary-policy authority, 10
political control, 29–30
as strategic actors, 59
cabinet durability statistical model, 107–19
dependent variable, 113–14
descriptive statistics, 113
methodology, 114–15
results, 115–19
sample, 112–13
Callaghan, James, 138–39
capital mobility, 32, 33, 102, 105, 107, 109, 172
Caplin, Ivor, 150
Carter, Jimmy, 63
central bank, 1, 3, 161, 172, 177
bankers as strategic actors, 59
conventional explanations for, 8–9, 30–35
reform trends, 2–3, 5–6, 13–14, 119–23
central bank independence, 19–22
accountability of, 58
appointments procedure, 21, 27–28, 49–50, 58
bureaucratic delegation, 33–34
cabinet’s ability to punish, 21, 50–51
central bank reform in 1990s, 2–3, 5–6, 13–14, 119–23
commitment to, 4–5
cross-national variation (1970–90), 4, 12–13, 23, 86–98
alternative hypotheses, 89–93
coalition and minority government, 88
constituent preferences, 87
economic openness, 91
electoral institutions, 87
incentive divergence, 87
interest groups, 92–93
legislative institutions, 87
measurement of variables, 87–88
partisanship, 91–92
polarization, 87
results, 88–89
sample, dependent variable, and methodology, 88
sensitivity analysis, 93–96, 204–5
threat of punishment, 87
defined, 19–22
democratic governance and, 69–71, 179–80
explanations for, 8–9, 12–16, 30–35, 89–93
federalism and, 4, 12–13, 73, 96–98
international political economy and, 32–33
macroeconomic theory and, 30–32
political benefits of, 49–55, 69–71
political control and, 19–20, 27–30
political credibility of, 49–51
political parties and, 9, 11–12, 53–55
political strategy, 58–60
price stability and, 19–20
rankings of (1970–90), 23
reform of political institutions and, 7, 15, 153–54
reform trend, 2–3, 5–6, 13–14, 119–23
threats to status, 28–29, 52–53
timing of reform, 14–15, 119–23
central bank institutions, 22–27. See also specific bank
appointments procedure, 21, 27–28, 49–50, 58
cross-national variation, 4, 12–13, 23, 86–98
political choice of, 53–54
political systems and, 78–86
central bank reform
in 1990s, 2–3, 5–6, 13–14, 119–23
economic openness and, 120, 123
explaining patterns of, 119–23
partisanship and, 122–23
party system changes and, 100–107
political institutional reform and, 7, 15, 153–54
political pressures, 153
variations in timing of, 6, 119–23
Centre for Economic Policy Research, 144
Churchill, Winston, 86
Clarke, Kenneth, 143, 145–47, 152
closed economy, 120
coalition government, 78–79, 83, 88, 199
coalition attributes, 109
coalition partners, 37, 39–40, 42, 74–78
informational checks of, 43–44
minimum-winning coalition, 109
minority coalition, 109
oversize coalition, 109
single-party governments, 116
single-party majority, 79, 83, 109
single-party minority, 109, 116
convergence criteria, 155, 161, 176. See also Maastricht Treaty
Craxi, Bettino, 134
Cukierman, Alex, 23
Cunliffe, Lawrence, 150
currency market volatility, 159
currency realignments, 163
D-mark, 16, 63, 66, 68, 141, 161, 164
Dalton, Hugh, 86
De Haan, Jakob, 32
deindustrialization, 177
delegation, 38–45
Delors, Jacques, 166
Delors Committee, 158
Democratic governance, central banks and, 3–8, 179–80
Denmark, EMU and, 161
D’Estaing, Valéry Giscard, 26, 65
Dini, Lamberto, 137
Duisenberg, Wim, 167
Economic and Monetary Union (EMU), 3, 7, 16, 61, 65, 68, 155. See also Maastricht Treaty; single currency
future of integration, 174–75
optimal currency area, 159–60
political feasibility, 161–62
uncertainty in 1990s, 158–62
economic openness, 91, 101, 107, 122
cabinet durability, 107–9
central bank reform and, 120
domestic institutions, 107–9
economic internationalization, 100–102, 111, 178
independent central bank, 107
mobile assets, 102
“post-materialist” agenda, 101
wealth effect, 101
economic policy
decreased effectiveness, 103–5
success of, 180
voter demands, 103
Ehrenberg, Herbert, 62
Eichengreen, Barry, 161
elections
electoral institutions, 76
electoral system reform, 178
electoral volatility, 14
political parties and, 9–10
electronic banking, 38
Euro (currency). See economic and monetary union; Maastricht Treaty; single currency
Euro-X council, 166
European Central Bank, 3, 173–75
European Commission, 70, 157, 175
European Community, 44, 133, 155, 158
European Exchange Arrangement (Snake), 129, 158
European integration, in 1990s, 165–67
European Monetary System (EMS), 14, 16, 29, 44, 61, 106, 133–34, 141–43, 155, 163
exchange-rate mechanism (ERM), 142
September 1992 crisis, 164–65
implications of EURG for, 171–76
monetary union and, 7
Fair, Don, 71
central bank independence and, 12–13, 73
Fiat, 134
financial-market deregulation, 104
Fischer, Stanley, 21
fixed exchange rate, 105, 133, 158
floating exchange rate, 5, 105
fractionalization, 109
franc fort, 165
France, 2–4, 122, 169. See also Bank of France
EMU and, 161
EU’s development, 157
Franzese, Robert, 32
Free Democratic Party (Germany), 61–64, 79–80
Friedman, Milton, 104
Genscher, Hans-Dietrich, 65, 157
German Basic Law, 80
German Bundesbank, 2, 22–23, 65–66, 78–83, 97
appointments procedure, 28, 50, 58
Central Bank Council, 82
challenging government’s policy choices, 60–61
European monetary commitments and, 65–66
founding of, 80–81
German monetary unification and, 66–68
information and policy conflict, 60–69
1992 reorganization of, 82–83
policy analysis of, 70
policy signals, 29
Social Democratic-Free Democratic coalition and, 4–5, 61–64
Germany, 2, 4, 169. See also German Bundesbank
Christian Democrats, 61, 79–82
economic and monetary unification, 157, 162–63
Free Democratic Party, 61–64
Monetary Unification Treaty, 68
political system and central bank, 78–80
Social Democrats, 61–64, 80–82, 105–6
Unity Fund, 68
Gonzalez, Felipe, 166
governance, political parties and, 10–11
government ministers, 74–78. See also cabinet
Granato, Jim, 94
Grilli, Vittorio, 23
Group of Seven (G-7), Bonn Summit (1978), 63
Growth and Stability Pact (1996), 161
Hall, Peter, 32
Healey, Lord, 144
Heisenberg, Dorothee, 70
incentive divergence, 74–75
independent central bank. See central bank independence
industrial democracies, party systems, 99–100
inflation, 2–3, 6, 13, 19, 62, 104
time-consistency problem and, 30
informational asymmetries, 37, 41–42, 97
monetary-policy process, 53–54
Inglehart, Ronald, 94
institutional reform, 7, 14, 15, 106, 153–54
central bank reform and, 7
interest groups, 34, 44, 92–93
intergovernmentalism, 157–58
International Monetary Fund (IMF), 129–31
international political economy, central bank and, 32–33
internationalization, central bank reform and. See economic openness
intraparty conflict, 9–12, 38–43, 74–78, 99, 105–7
Italian lira, 129–30, 134, 163, 165
Italy, 2, 7, 122–23, 164, 166, 169. See also Bank of Italy
central bank reform in, 126–29
Christian Democrats, 7, 14–15, 34, 106, 125–33, 136–37
Communist party, 128–29, 131–33
credit ceilings, 135
economic performance in 1970s, 129–32
EMS and, 14, 133–35, 157, 164–65
EMU and, 161
evaluating central bank reform, 136–37
International Monetary Fund (IMF), 129–31
monetary policy reform, 133–35
political conflict in 1970s, 129–32
union’s “Hot Autumn,” 128
Jackman, Robert, 93
Kaminsky, Horst, 67
Klasen, Karl, 60
La Malfa, Ugo, 129
labor-market organization, 32, 160, 172
Lambsdorff, Count Graf, 63
Lamont, Norman, 142–43
Leblang, David, 94
Liddell, Helen, 150
Lijphart, Arend, 87
Maastricht Treaty, 3, 7, 16, 66, 152, 155–56. See also economic and monetary union, single currency
fiscal implications, 160–61
German unification, 162–63
origins of, 156–58
political feasibility, 161–62
September 1992 crisis, 164–65
single currency desirability, 159
uncertainty in 1990s, 158–62
Major, John, 142–43, 147, 164, 166
Masciandaro, Donato, 23
Maxfield, Sylvia, 92
McCubbins, Mathew, 89
Mitterrand, François, 106, 162, 166
monetary policy
bureaucrats and politicians, 20
constituent preferences, 75, 101–3
decreased effectiveness of, 104
delegation and, 38–45
federalism and, 73
incentive divergence, 74–75
information asymmetries, 97
institutional reform, 105–6
intraparty conflicts and, 74, 105
lag times of, 38
national autonomy, 170–71
political influence over, 19, 27–30
political parties and, 38–45
potential for conflict, 42–43, 74
socioeconomic change, 105
as strategic interaction, 57–58
targets, 62
time-consistency problem, 30
monetary policy-making model, 45–55, 181–97
equilibrium behavior (ex-post authority), 50–51, 192–97
equilibrium behavior (no ex-post authority), 186–92
equilibrium concept, 185–86
game-theory model of, 44–55
implications, 51–55
information structure, 181–82
informational asymmetries of, 54
logic and theory of, 45–48
payoffs, 182–83
results of, 48–51
sequence of moves, 183–85
strategies, 182
Monetary Unification Treaty (Germany), 66–68
Mundell-Fleming conditions, 105
neofunctionalism, 157
New Zealand, 2–4, 7, 31, 122–23, 144, 153
“contracting” approach, 20
Reserve Bank Bill (1989), 70–71
Nixon administration, 5
Noll, Roger, 89
Norman, Montague, 84–85
Norway, 3
oil crisis, 4–5, 62–63, 124, 129
One Market, One Money (Emerson et al.), 157
opportunistic models, 8–9
optimal currency area, 159–60
partisan models, 8–9
partisanship, 7, 91–92, 112, 122–23
party leaders, 123
party system. See also political parties
attributes, 109
changes in, 100–107
changing constituent demands, 101–3
fractionalization, 116
industrial democracies, 99–100
instability of, 101
Petick-Lawrence, Lord, 86
Phillips Curve, 104
Pohl, Karl Otto, 61, 67–68, 82
policy process
game-theory model of, 44–55
informational asymmetries of, 37, 41–42
political conflict, central bank independence and, 54–55, 59–60
signals, 28–29
political parties, 9–12, 38–45, 96. See also party system
central bank independence and, 11–12, 99, 119–23
changing constituent demands, 101–3
decreased policy effectiveness, 103–5
domestic reform, 99, 123–24, 178
elections and, 9–10
governance and, 10–11
individual party politicians, 9–10
intraparty conflicts, 9–12, 38–43, 74–78, 105–7
single currency and, 167–71
political reform, central bank independence and, 153–54
Portugal, 3
Powell, G. Bingham, 87
principal-agent theory, 10, 20, 37
cabinet-legislature, 37–43
central bank independence, 49–55
institutional solutions, 44–45
politicians-central bank, 27–30, 58–60
public sector, 102
Radcliffe, Cyril, 85–86
Radice, Giles, 151
Reserve Bank of New Zealand, 144. See also New Zealand
Santer, Jacques, 166
Schiller, Karl, 60
single currency. See also Maastricht Treaty
intergovernmentalism, 157–58
international state competition, 158
labor-market organization, 172
loss of autonomy, 170–71
neofunctionalism, 157
origins of, 156–58
political consequences of, 172–73
political parties and, 167–71
speculative currency attacks, 168
transaction costs reductions, 160
Single European Act (1986), 155, 160
Skinner, Dennis, 150
“social market” economy, 79
Spadolini, Giovanni, 134
Spain, 3, 122–23, 161, 166, 169
speculative currency attacks, 168
Stability and Growth Pact, 166
Summers, Lawrence, 23
Sweden, 123
Swiss National Bank, 22
Tabellini, Guido, 23
Tapsell, Peter, 152
Thatcher, Margaret, 6, 75, 106, 139–42
Tietmeyer, Hans, 174
time-consistency problem, 30
Timms, Stephen, 150
Treaty on European Union. See Maastricht Treaty
Trichet, Jean-Claude, 167
Turner, Adair, 149
tying-the-hands argument, 91
unemployment, 13, 32, 62, 68, 104
Union for French Democracy (UDF), 26
cabinet durability, 121–22
political party conflict, 106
United States Federal Reserve, 22
appointments procedure, 28, 50
economic reports, 71
governing board, 58
Open Market Committee (FOMC), 27–28
policy signals, 28–29
Van’t hag, Gert, 32
Ventriglia, Ferdinando, 127
wage contracts, 104
Waller, Christopher, 20
Walters, Alan, 142
Weingast, Barry, 89
Welsch, Roy, 94
Westminster system, 153
Wyplosz, Charles, 161