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Paper Autonomy, Private Ambition:Central Bankers' Careers and the Economy

Central bankers' careers are shown to influence inflation outcomes. I present two theories in which careers explain central bank behavior, develop them in a game theoretic model, and test them using a comprehensive new data set of central bankers' career backgrounds which spans twenty rich democracies and half a century. Career experiences vary considerably over this sample, and not only mould beliefs about appropriate policy (the socialization hypothesis), but also shape career concerns for central bankers who seek career advancement in either the financial sector or government (the career incentives hypothesis). Accordingly, time series cross-section analysis of inflation shows central bankers with financial sector backgrounds preside over lower inflation, while central bankers with bureaucratic experience produce higher inflation. The magnitude of career effects on inflation is on par with standard measures of central bank independence, and interactive models suggest both socialization and incentives contribute to these career effects. The study of central banks in particular and bureaucracy in general should pay greater attention to individual preferences and their interaction with organizations; institutions alone are not enough.