Should central banks have an equality mandate?

Event held on Tuesday 31 October 2023
Hosted by the LSE School of Public Policy and the Centre for Macroeconomics at the LSE

Central banks around the world are usually given a mandate to conduct monetary policy to achieve a small number of aggregate objectives, most often low and stable inflation and full employment. However, there has been increasing pressure to add distributional equity to the list of official goals. An example is a proposal, now in the U.S. Congress, to amend the Federal Reserve Act to “make reducing inequality part of the Fed’s mission”.

This lecture will discuss these debates with special emphasis on the role of a central bank’s mandate in attaining social welfare. The evaluation of equality as a central bank’s goal requires analyzing implications for the incentive properties of the mandate. Such a perspective can justify charging central banks with the reduction of inequality but, at the same time, it delivers novel and unexpected lessons.

Meet our Speaker and Chair

Roberto Chang is Visiting Professor at the LSE School of Public Policy and Distinguished Professor of Economics at Rutgers University. He is also a Research Associate at the National Bureau of Economic Research. He has also served as a visiting faculty member at Princeton University and Columbia University.

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In theory, governments exist to primarily help society be better off. Since a central bank is part of the government, it should not be a surprise that it’s sensible to expect that this institution contributes with the improvement of society. Two ways to do it is by helping reduce financial fraud and by prioritizing the granting of emergency loans to institutions that have a greater impact on economic development. And yes, I’m purposely not providing details.