2021 Theses Bachelor's

Crisis Actors: Understanding the Dynamics Between Central Banks and Legislative Bodies

Sharma, Vishesh

Over the last two decades, the Federal Reserve has been given more powers to address and manage crises; at the same time, there has been increasing legislative gridlock in the American Congress. This paper aims to investigate how potential legislative gridlock affects the action of central banks in an attempt to understand whether or not central banks are truly independent in their actions or if they are influenced by a less efficient legislative body; specifically, the main hypothesis this paper seeks to test is: if indicators of greater legislative gridlock are present, then there is a greater likelihood the central bank acts and acts with greater speed. The paper concludes that there is not much evidence to support this hypothesis; in fact, the quantitative results suggest the presence of or greater amount of some indicators actually decrease the likelihood of the central bank acting along with its speed. Following these results with a case study, however, did support some original expectations. Overall, there were no consistent results across the quantitative and qualitative analyses, suggesting there may be other factors that explain such differences.