Question

Why would buying corporate bonds expose a central bank to more political pressure than would buying bonds issued by a government? Buying bonds in a particular industry_______ that industry and can lead to politicians_____

Answer 1

Buying corporate bonds exposes a central bank to more political pressure than buying government bonds due to the influence it can have on private entities. Politicians may exert pressure to further their own interests or gain support from affected industries.

Step-by-step explanation:

Buying corporate bonds exposes a central bank to more political pressure than buying bonds issued by a government because it involves investing in private entities rather than a government. When a central bank buys corporate bonds, it becomes a significant stakeholder in the company, and its decisions can affect the company's operations, employees, and overall performance. This can lead to politicians exerting pressure on the central bank to influence their investment decisions for political or economic reasons.

For example, if a central bank buys bonds in a specific industry, it might be seen as favoring that industry over others, which could lead to accusations of biased decision-making and political interference. Politicians may use this as an opportunity to push their own agendas or gain support from affected industries or stakeholders.