LEADER 02844cam a22004935i 4500001 99131234220506421 005 20210308141805.0 006 m d 007 cr cn||||||||| 008 160311s2021 dcu o i00 0 eng^^ 024 8 10.1596/1813-9450-9522 |2doi 035 (The World Bank)9522 035 (CKB)4100000011793252 035 (US-djbf)9522 035 (EXLCZ)994100000011793252 040 DJBF |beng |cDJBF |erda 100 1 Aklin, Michael. 245 10 Does Central Bank Independence Increase Inequality? / |cMichael Aklin. 264 1 Washington, D.C. : |bThe World Bank, |c2021. 300 1 online resource (51 pages) 336 text |btxt |2rdacontent 337 computer |bc |2rdamedia 338 online resource |bcr |2rdacarrier 347 data file |2rda 520 3 Since the 1980s, income inequality has increased substantially in several countries. Yet the political logic that triggered rising inequality in some places but not in others remains poorly understood. This paper builds a theory that links central bank independence to these dynamics. It posits the existence of three mechanisms that tie central bank independence to inequality. First, central bank independence indirectly constrains fiscal policy and weakens a government's ability to engage in redistribution. Second, central bank independence incentivizes governments to deregulate financial markets, which generates a boom in asset values. These assets are predominantly in the hands of wealthier segments of the population. Third, to contain inflationary pressures, governments actively promote policies that weaken the bargaining power of workers. Together, these policies strengthen secular trends towards higher inequality according to standard indicators. Empirically, the analysis finds a strong relation between central bank independence and inequality, as well as support for each of the mechanisms. From a policy perspective, our findings contribute to knowledge on the undesirable side effects of central bank independence. 650 4 Central Bank 650 4 Finance and Development 650 4 Finance and Financial Sector Development 650 4 Financial Deregulation 650 4 Fiscal and Monetary Policy 650 4 Fiscal Policy 650 4 Income Distribution 650 4 Inequality 650 4 Labor Market 650 4 Macroeconomics and Economic Growth 650 4 Monetary Policy 650 4 Poverty 650 4 Poverty Reduction 650 4 Wages 700 1 Kern, Andreas. 700 1 Negre, Mario. 830 0 Policy research working papers. 830 0 World Bank e-Library. 906 BOOK