Rocking the Fed's Boat

TL;DRAbstract

The global credit crisis provides new impetus for financial regulatory reform, and new risks for central bank independence. Because monetary policy is implemented using relatively blunt instruments, policy changes seldom result in narrowly defined winners and losers. In contrast, many aspects of financial regulation result in specific benefits and costs for particular firms and types of households. To the extent that specificity of policy incidence reduces the cost of collective action, expanding the Fed's scope of authority over financial regulatory policy can increase risks to central bank independence, and effective monetary policy as a result.

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