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Central Bank Independence, Disinflations and Monetary Policy

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  • Down Ian

    (University of Tennessee, Knoxville)

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    Abstract

    Analyses of central bank independence (CBI) have generated two sets of apparently contradictory results - CBI appears to be both inversely related to inflation and positively related to the rise in unemployment and slowdown in economic growth during disinflations. I suggest that these results may issue from autonomous central banks being associated with sharper, more aggressive disinflations. To test the proposition I use two measures of policy stance, one of which contains more information concerning policymaker's expectations than has heretofore been the case. The results suggest a need to qualify yet further the optimality of CBI.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Business and Politics.

    Volume (Year): 10 (2009)
    Issue (Month): 3 (January)
    Pages: 1-22

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    Handle: RePEc:bpj:buspol:v:10:y:2009:i:3:n:1

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    1. Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2001. " Central Bank Independence: An Update of Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 3-40, February.
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    5. Daniels, Joseph P & Nourzad, Farrokh & Vanhoose, David D, 2005. "Openness, Central Bank Independence, and the Sacrifice Ratio," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 371-79, April.
    6. Oatley, Thomas, 1999. " Central Bank Independence and Inflation: Corporatism, Partisanship, and Alternative Indices of Central Bank Independence," Public Choice, Springer, vol. 98(3-4), pages 399-413, March.
    7. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
    8. Giuseppe Diana & Moise Sidiropoulos, 2003. "Central Bank Independence, Speed of Disinflation and the Sacrifice Ratio," Working Papers of BETA 2003-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
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