## The Macroeconomic Consequences of Undermining Central Bank Independence: Evidence from Governor Transitions

_IMF Working Papers, March 6, 2026_

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## Bibliographic details
- Authors: Marijn A. Bolhuis, Rui Mano, Hedda Thorell
- Published: March 6, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229039017.001

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### Study scope and data
- 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:
  - Pages: 51
  - Volume: 2026
  - Issue: 040
  - Series: Working Paper No. 2026/040
  - DOI: https://doi.org/10.5089/9798229039017.001
  - Stock No: WPIEA2026040
  - ISBN: 9798229039017
  - ISSN: 1018-5941

### Research question and methodology
- Primary question:
  - What are the macroeconomic consequences of undermining central bank independence through politically motivated transitions of central bank governors?
- Empirical approach:
  - Leverages a new panel dataset of governor transitions.
  - Uses local projections in a difference-in-difference setting to estimate dynamic responses following announcement of politically motivated governor transitions.
- Key classifications:
  - Transitions identified as politically motivated versus not.
  - Incoming governors classified as professing unorthodox views on monetary policy versus not.

### Main findings
- Associations with politically motivated appointments:
  - Tenures of governors with politically motivated appointments are associated with higher and more volatile inflation, both realized and expected.
  - Professional forecasters tend to expect such governors to be more dovish when responding to shifts in inflation.
- Dynamic responses after announcement of politically motivated governor transitions:
  - Nominal short rates decline.
  - Real short rates decline.
  - Expected inflation rises.
  - Realized inflation rises.
  - GDP growth increases in the aftermath, consistent with an expansionary short-run macroeconomic impulse.
- Role of unorthodox incoming governors:
  - 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.
  - 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.
- Interpretation:
  - Political interference in central bank leadership induces a temporary growth–inflation trade-off.
  - Credibility costs manifest more strongly and persistently when politically motivated appointments bring unorthodox policymakers.

### Policy-relevant implications
- Undermining central bank independence via politically motivated governor transitions:
  - Raises near-term inflation and inflation volatility.
  - Lowers nominal and real short-term interest rates following announcements.
  - Can boost GDP growth in the short run, creating a temporary trade-off between growth and inflation.
- Credibility considerations:
  - 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.
- Significance for policymakers:
  - 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.

*Source: 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.*

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_Source: https://www.imf.org/en/publications/wp/issues/2026/03/06/the-macroeconomic-consequences-of-undermining-central-bank-independence-evidence-from-574295_