Too many central bankers

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Front page of the Budapest Times this week has an article about the Hungarian central bank governor’s salary being cut. He currently earns more than twice Ben Bernanke’s salary. Maybe he’s twice as efficient as Bernanke, but I doubt it, and the Hungarian government is clearly having some doubts. So how many central bankers does a country need? I recall a conversation with a senior central bank official from a small central bank to our right who argued that central banks should only need a handful of staff – they just had to say up or down on interest rates and that was about it. The Economist Magazine in December last year published a list of the number of central bankers by country. It would be interesting to correlate this measure with average inflation. By all measures Russia has the biggest central bank with 71,200 employees, but they are hardly a paragon of central bank virtue – prices have increased 1500 hundred fold since 1992. Australia, by comparison has 1000 employees, and here prices have increased by about 50 percent since 1992 (that year is only chosen because that’s the longest data series for inflation in Russia that I have).

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