The Educational and Professional Background of Central Bankers and its Effect on Inflation – An Empirical Analysis

We assume that central banks can control inflation so that inflation rates reflect the preferences of the central bank council.The hypothesis to be tested is that these preferences depend on the central bankers’ educational and/or professional background. In a panel data analysis for the euro area and eleven countries since 1973,we explain inflation first by the weights which the various educational and professional characteristics occupy in the central bank council and second by the education or profession of the median central bank council member. Our results indicate that, with regard to professional background, former members of the central bank staff as well as former bankers and businessmen have the strongest inflation aversion and that former trade unionists and politicians seem to have the highest inflation preference.As for the education of the council members, our results are less robust. However, if the median member of the central bank council has studied business, the inflation rate is significantly lower than if she has studied economics.