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Masters of the ‘masters of the universe’? Monetary, fiscal and financial dominance in the Eurozone

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  • Diessner, Sebastian
  • Lisi, Giulio
Abstract
The rise of central bankers to the status of new ‘masters of the universe’ has been matched by mounting allegations of political overreach. In the Eurozone, for instance, the ECB has increasingly been accused of straying into the fiscal realm. Why do politically independent central banks engage intensely and publicly with government policies, thereby threatening the neat separation between monetary and fiscal policy that was meant to protect central banks themselves from interference? While existing political economy accounts have focused squarely on the issues of government debt and central bankers' fears of fiscal dominance, we argue for the emerging role of ‘financial dominance’ throughout the crisis, thereby shedding light on the structural forces that master the new masters of the universe. To this end, we pursue a mixed-methods approach, combining quantitative text analysis techniques with a qualitative understanding of the context in which central banks communicate on fiscal policy.

Suggested Citation

  • Diessner, Sebastian & Lisi, Giulio, 2019. "Masters of the ‘masters of the universe’? Monetary, fiscal and financial dominance in the Eurozone," LSE Research Online Documents on Economics 100754, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:100754
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    File URL: http://eprints.lse.ac.uk/100754/
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    More about this item

    Keywords

    financial markets; financial crisis; political economy; government; strategic interactions;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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