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Central banks overestimate themselves? – Conclusion

The study now published in Chicago does not contain dynamite solely through its results. But through the obvious follow-up question: Why are economists in central banks’ assessments of the effects of bond purchases better than those of economists at universities?

It is evident that in many central banks the management at least occasionally has an influence not only on issues dealt with by their economists, but also on specific work. Studies by economists often require the approval of at least the head of the research department before they are published, but not infrequently also from the management of the central bank. The note on many working papers that the results do not necessarily coincide with the views of the central bank creates an impression of complete independence that may not always be given.

But one shouldn’t fall into the other extreme and view central bank economists as fundamentally helpless recipients of orders from their bosses. Respected on Twitter, respected economists from American regional central banks with the credible assurance that they were facing no pressure.

On the other hand, pressure is probably not absolutely necessary either: In almost every institution, employees have incentives to behave in a way that benefits rather than harms the interests of their institution. An economist who declares the monetary policy pursued by his central bank to be fundamentally wrong is likely to have worse career opportunities than an economist who declares the monetary policy of his institution to be correct.

One aspect that deserves additional study is the question of the influence of central banks on academic research in the field of monetary policy. Central banks are more active than in other areas of economic policy as organizers or co-organizers of conferences in their specialist field, to which academic economists are invited.

Central banks also provide financial support for some conferences and projects, even if they are not officially the organizers. Economist John Cochrane has suggested that central bank governors should invite a “devil’s advocate” to meetings to present them with alternative points of view.

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