{
  "title": "The Macroeconomic Consequences of Undermining Central Bank Independence: Evidence from Governor Transitions",
  "publication": "IMF Working Papers, March 6, 2026",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2026/03/06/the-macroeconomic-consequences-of-undermining-central-bank-independence-evidence-from-574295",
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  "summary": "This paper studies the macroeconomic consequences of undermining central bank independence through politically motivated transitions of central bank governors.",
  "sections": [
    {
      "heading": "Study scope and data",
      "content": "- Authors: Marijn A. Bolhuis, Rui Mano, Hedda Thorell\n- Date: March 6, 2026\n- Dataset covers 132 central bank governor transitions in 28 advanced and emerging market economies since 2000.\n- Publication details:\n  - Pages: 51\n  - Volume: 2026\n  - Issue: 040\n  - Series: Working Paper No. 2026/040\n  - DOI: https://doi.org/10.5089/9798229039017.001\n  - Stock No: WPIEA2026040\n  - ISBN: 9798229039017\n  - ISSN: 1018-5941"
    },
    {
      "heading": "Research question and methodology",
      "content": "- Primary question:\n  - What are the macroeconomic consequences of undermining central bank independence through politically motivated transitions of central bank governors?\n- Empirical approach:\n  - Leverages a new panel dataset of governor transitions.\n  - Uses local projections in a difference-in-difference setting to estimate dynamic responses following announcement of politically motivated governor transitions.\n- Key classifications:\n  - Transitions identified as politically motivated versus not.\n  - Incoming governors classified as professing unorthodox views on monetary policy versus not."
    },
    {
      "heading": "Main findings",
      "content": "- Associations with politically motivated appointments:\n  - Tenures of governors with politically motivated appointments are associated with higher and more volatile inflation, both realized and expected.\n  - Professional forecasters tend to expect such governors to be more dovish when responding to shifts in inflation.\n- Dynamic responses after announcement of politically motivated governor transitions:\n  - Nominal short rates decline.\n  - Real short rates decline.\n  - Expected inflation rises.\n  - Realized inflation rises.\n  - GDP growth increases in the aftermath, consistent with an expansionary short-run macroeconomic impulse.\n- Role of unorthodox incoming governors:\n  - Effects (declines in short rates and rises in inflation and GDP growth) are more pronounced when the incoming governor professes unorthodox views on monetary policy.\n  - Long-term inflation expectations rise only in the case of unorthodox governors with politically motivated appointments, indicating larger costs to central bank credibility in those cases.\n- Interpretation:\n  - Political interference in central bank leadership induces a temporary growth–inflation trade-off.\n  - Credibility costs manifest more strongly and persistently when politically motivated appointments bring unorthodox policymakers."
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- Undermining central bank independence via politically motivated governor transitions:\n  - Raises near-term inflation and inflation volatility.\n  - Lowers nominal and real short-term interest rates following announcements.\n  - Can boost GDP growth in the short run, creating a temporary trade-off between growth and inflation.\n- Credibility considerations:\n  - When politically motivated appointments are paired with incoming governors holding unorthodox views, long-term inflation expectations increase, signaling more persistent damage to monetary policy credibility.\n- Significance for policymakers:\n  - Political interference in central bank leadership decisions can have measurable macroeconomic effects, including on inflation dynamics, interest rates, and short-run output—effects that depend on the views of the incoming governor.\n\nSource: IMF Working Papers — \"The Macroeconomic Consequences of Undermining Central Bank Independence: Evidence from Governor Transitions\" (Marijn A. Bolhuis, Rui Mano, Hedda Thorell), Working Paper No. 2026/040, March 6, 2026.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2026/03/06/the-macroeconomic-consequences-of-undermining-central-bank-independence-evidence-from-574295"
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    "Authors: Marijn A. Bolhuis, Rui Mano, Hedda Thorell",
    "Published: March 6, 2026",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229039017.001",
    "Authors: Marijn A. Bolhuis, Rui Mano, Hedda Thorell",
    "Date: March 6, 2026",
    "Dataset covers 132 central bank governor transitions in 28 advanced and emerging market economies since 2000.",
    "Publication details:",
    "Primary question:",
    "Empirical approach:",
    "Key classifications:",
    "Associations with politically motivated appointments:",
    "Dynamic responses after announcement of politically motivated governor transitions:",
    "Role of unorthodox incoming governors:",
    "Interpretation:",
    "Undermining central bank independence via politically motivated governor transitions:",
    "Credibility considerations:",
    "Significance for policymakers:",
    "**Working Paper**"
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