National Appointments to Multinational Monetary Policy Making: A Role Conflict?

Abstract

Territorial appointees to an independent central bank (e.g. District Federal Reserve Banks’ presidents, Governors of national central banks at the ECB’s Governing Council) are liable to confront a “role conflict” stemming from a duality of loyalties and allegiances - to the home regional territory to which they owe the appointment and to the central bank to which they are appointed. This essay examines the issue of two “principals” for a given “agent”, within the framework of a “common agency” model in European monetary policymaking. Territorial appointees cannot afford being unresponsive to their country-specific monetary preferences – as dictated by idiosyncratic social and economic structures, political orientations, cultural factors, and other determinants. Local preferences may conflict with the central bank’s mandated objectives, its social and political environment, the constellation of institutions gravitating in its orbit, which shape a given mindset and culture to which the territorial appointees are also prone to conform.monetary policy, central bank council