The bureaucratic and partisan behavior of independent central banks: German and international evidence

Abstract

Central bank staff depends positively on the country's population size, its per capita income and the central bank's independence with respect to salaries. In the developing countries, exchange rate pegging can reduce central bank staff. Among the industrial countries, France, Belgium/Luxembourg and Germany have the most overstaffed central banks. In Germany, central bank revenue has a significantly positive effect on staff size. A non-parametric test for the German Bundesbank confirms the hypothesis that monetary expansion (M1) accelerates when the government has a political majority in the central bank council at the beginning of the pre-election period or when the political majority in the council changes in favor of the government during the pre-election period (and that monetary expansion decelerates if the reverse is true).