IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v24y2008i4p802-816.html
   My bibliography  Save this article

No single definition of central bank independence is right for all countries

Author

Listed:
  • Siklos, Pierre L.

Abstract

A new international data set covering over 100 countries for the period 1990-2004 is used to investigate the relationship between central bank independence (CBI) and inflation. CBI is a combination of de jure and de facto characteristics. No single mix of characteristics uniquely defines CBI. Consequently, no single definition of CBI is 'right' for all countries. The distribution of inflation around the world is concentrated in the tails. Hence, quantile regressions are estimated to investigate the role of CBI. We do find strong evidence that several core elements of what can be defined as CBI do reduce inflation.

Suggested Citation

  • Siklos, Pierre L., 2008. "No single definition of central bank independence is right for all countries," European Journal of Political Economy, Elsevier, vol. 24(4), pages 802-816, December.
    • Handle: RePEc:eee:poleco:v:24:y:2008:i:4:p:802-816
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0176-2680(08)00054-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Banaian, King & Burdekin, Richard C K & Willett, Thomas D, 1998. "Reconsidering the Principal Components of Central Bank Independence: The More the Merrier?," Public Choice, Springer, vol. 97(1-2), pages 1-12, October.
    2. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    3. Charles A. E. Goodhart, 1995. "The Central Bank and the Financial System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262071673, December.
    4. Svensson, Lars E O, 1997. "Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts," American Economic Review, American Economic Association, vol. 87(1), pages 98-114, March.
    5. Eijffinger, Sylvester & van Rooij, Maarten & Schaling, Eric, 1996. "Central Bank Independence: A Paneldata Approach," Public Choice, Springer, vol. 89(1-2), pages 163-182, October.
    6. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 1-48.
    7. C. A. E. Goodhart, 1995. "The Central Bank and the Financial System," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-37915-2.
    8. Johnson, David R & Siklos, Pierre L, 1996. "Political and Economic Determinants of Interest Rate Behavior: Are Central Banks Different?," Economic Inquiry, Western Economic Association International, vol. 34(4), pages 708-729, October.
    9. Robert H. Rasche & Marcela M. Williams, 2007. "The effectiveness of monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 89(Sep), pages 447-490.
    10. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
    11. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, January.
    12. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-162, May.
    13. Anne Sibert, 2006. "Central Banking by Committee," International Finance, Wiley Blackwell, vol. 9(2), pages 145-168, August.
    14. Temple, Jonathan, 1998. "Central bank independence and inflation: good news and bad news," Economics Letters, Elsevier, vol. 61(2), pages 215-219, November.
    15. James Forder, 2005. "Why Is Central Bank Independence So Widely Approved?," Journal of Economic Issues, Taylor & Francis Journals, vol. 39(4), pages 843-865, December.
    16. Adam S. Posen, 1995. "Declarations Are Not Enough: Financial Sector Sources of Central Bank Independence," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 253-274, National Bureau of Economic Research, Inc.
    17. Mr. Allan Timmermann, 2006. "An Evaluation of the World Economic Outlook Forecasts," IMF Working Papers 2006/059, International Monetary Fund.
    18. McCallum, Bennett T, 1995. "Two Fallacies Concerning Central-Bank Independence," American Economic Review, American Economic Association, vol. 85(2), pages 207-211, May.
    19. Christopher Crowe & Ellen E. Meade, 2007. "The Evolution of Central Bank Governance around the World," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 69-90, Fall.
    20. Vaubel, Roland, 1997. "The bureaucratic and partisan behavior of independent central banks: German and international evidence," European Journal of Political Economy, Elsevier, vol. 13(2), pages 201-224, May.
    21. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," The World Bank Economic Review, World Bank, vol. 6(3), pages 353-398, September.
    22. Banaian, King & Luksetich, William A, 2001. "Central Bank Independence, Economic Freedom, and Inflation Rates," Economic Inquiry, Western Economic Association International, vol. 39(1), pages 149-161, January.
    23. Siklos,Pierre L., 2006. "The Changing Face of Central Banking," Cambridge Books, Cambridge University Press, number 9780521034494.
    24. Marco Arnone & Bernard J Laurens & Jean-François Segalotto & Martin Sommer, 2009. "Central Bank Autonomy: Lessons from Global Trends," IMF Staff Papers, Palgrave Macmillan, vol. 56(2), pages 263-296, June.
    25. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
    26. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
    27. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
    28. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 1-10, December.
    29. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    30. Canzoneri,Matthew B. & Grilli,Vittorio & Masson,Paul R. (ed.), 1992. "Establishing a Central Bank," Cambridge Books, Cambridge University Press, number 9780521420983.
    31. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
    32. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
    33. Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
    34. James Forder, 2002. "Interests and 'Independence': The European Central Bank and the theory of bureaucracy," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 51-69.
    35. Ms. JoAnne Morris & Mr. Tonny Lybek, 2004. "Central Bank Governance: A Survey of Boards and Management," IMF Working Papers 2004/226, International Monetary Fund.
    36. Acheson, Keith & Chant, John F, 1973. "Bureaucratic Theory and the Choice of Central Bank Goals," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(2), pages 637-655, May.
    37. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    38. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.
    2. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Donato Masciandaro & Davide Romelli, 2018. "To Be or not to Be a Euro Country? The Behavioural Political Economics of Currency Unions," BAFFI CAREFIN Working Papers 1883, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Donato Masciandaro & Davide Romelli, 2019. "Behavioral Monetary Policymaking: Economics, Political Economy and Psychology," World Scientific Book Chapters, in: Behavioral Finance The Coming of Age, chapter 9, pages 285-329, World Scientific Publishing Co. Pte. Ltd..
    5. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093.
    6. Masciandaro, Donato, 2022. "Independence, conservatism, and beyond: Monetary policy, central bank governance and central banker preferences (1981–2021)," Journal of International Money and Finance, Elsevier, vol. 122(C).
    7. Michael Berlemann & Kai Hielscher, 2016. "Measuring Effective Monetary Policy Conservatism of Central Banks: A Dynamic Approach," Annals of Economics and Finance, Society for AEF, vol. 17(1), pages 105-132, May.
    8. Hayo, Bernd & Hefeker, Carsten, 2002. "Reconsidering central bank independence," European Journal of Political Economy, Elsevier, vol. 18(4), pages 653-674, November.
    9. Weymark, Diana N., 2007. "Inflation, government transfers, and optimal central bank independence," European Economic Review, Elsevier, vol. 51(2), pages 297-315, February.
    10. Donato Masciandaro, 2021. "Central Bank Governance in Monetary Policy Economics (1981-2020)," BAFFI CAREFIN Working Papers 21153, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    11. Berlemann, Michael & Hielscher, Kai, 2011. "A Time-varying Indicator of Effective Monetary Policy Conservatism," Working Paper 112/2011, Helmut Schmidt University, Hamburg.
    12. Hielscher, Kai & Markwardt, Gunther, 2012. "The role of political institutions for the effectiveness of central bank independence," European Journal of Political Economy, Elsevier, vol. 28(3), pages 286-301.
    13. Davide Romelli, 2022. "The political economy of reforms in Central Bank design: evidence from a new dataset," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(112), pages 641-688.
    14. Donato Masciandaro & Davide Romelli, 2018. "Beyond the Central Bank Independence Veil: New Evidence," BAFFI CAREFIN Working Papers 1871, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    15. Michael Berlemann & Kai Hielscher, 2013. "Effective Monetary Policy Conservatism: A Comparison of 13 OECD Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(3), pages 267-290, July.
    16. Donato Masciandaro, 2018. "Central Banks And Macroprudential Policies: Economics And Politics," BAFFI CAREFIN Working Papers 1878, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    17. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    18. Posso, Alberto & Tawadros, George B., 2013. "Does greater central bank independence really lead to lower inflation? Evidence from panel data," Economic Modelling, Elsevier, vol. 33(C), pages 244-247.
    19. Crowe, Christopher & Meade, Ellen E., 2008. "Central bank independence and transparency: Evolution and effectiveness," European Journal of Political Economy, Elsevier, vol. 24(4), pages 763-777, December.
    20. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126, Decembrie.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:24:y:2008:i:4:p:802-816. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.