Towards measurement of political pressure on central banks in the emerging market economies: the case of the central bank of Egypt
AbstractThis paper assesses whether the legal independence granted to the Central Bank of Egypt (CBE) under the latest legislation is factual. I followed Fry’s methodology, which assumes that the level of independence of the central bank is determined by fiscal attributes. In an attempt to develop Fry’s method, I used a simple criterion to assess the central bank’s independence, namely, that the central bank is actually independent if it can fulfill its money supply target. Applying this criterion to the CBE and some other CBs in the developed countries and emerging market economies, we find that: (i) the legal independence granted to the CBE under the latest legislation is not factual; although the final objective of monetary policy is to achieve price stability, the CBE failed to fulfill its money supply target and achieve price stability, because it was responsive to political pressure and did not react to fulfill its money supply target; (ii) such political pressure on the CBE is due to fiscal attributes, as measured by domestic credit to the government; (iii) CBs whose independence is factual, according to our criterion, showed a negative relationship between the legal indices, as measured by the GMT index, and the fiscal attributes measured by DCGY. However, the relationship was anomalous when measured by the rate of inflation
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Bibliographic InfoArticle provided by Alexandru Ioan Cuza University, Faculty of Economics and Business Administration in its journal Review of Economic and Business Studies.
Volume (Year): 1 (2008)
Issue (Month): (December)
monetary policy; central bank independence; fiscal dominance; political pressure;
Other versions of this item:
- Ibrahim L. Awad, 2007. "Towards Measurement of Political Pressure on Central Banks in the Emerging Market Economies: The Case of the Central Bank of Egypt," Working Papers IES 2007/30, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2007.
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
- H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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