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Inside and outside the central bank: Independence and accountability in financial supervision: Trends and determinants

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  • Masciandaro, Donato
  • Quintyn, Marc
  • Taylor, Michael W.

Abstract

This paper analyzes recent trends in, and determinants of, financial supervisory governance inside and outside central banks. We first review the case for supervisory independence and accountability in order to frame the econometric work on their determinants. We then calculate the levels of supervisory independence and accountability in 55 countries, disentangling similarities and differences among central banks and pure financial supervisors. The empirical analysis of the determinants indicates that the quality of public sector governance plays a decisive role in establishing accountability arrangements, more than independence arrangements. It also shows that decisions regarding levels of independence and accountability are not well-connected. The results also show that the likelihood for establishing governance arrangements suitable for supervision is higher when the supervisor is located outside the central bank.

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File URL: http://www.sciencedirect.com/science/article/B6V97-4T13CCW-1/2/8b37a573e3979c468d6b7fae2b79106f
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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 24 (2008)
Issue (Month): 4 (December)
Pages: 833-848

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Handle: RePEc:eee:poleco:v:24:y:2008:i:4:p:833-848

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Web page: http://www.elsevier.com/locate/inca/505544

Related research

Keywords: Financial supervision Central banking Independence Accountability Political economy;

References

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  1. Eijffinger, Sylvester C W & Hoeberichts, Marco, 2002. "Central Bank Accountability and Transparency: Theory and Some Evidence," International Finance, Wiley Blackwell, vol. 5(1), pages 73-96, Spring.
  2. Udaibir S. Das & Marc Quintyn, 2002. "Crisis Prevention and Crisis Management: The Role of Regulatory Governance," IMF Working Papers 02/163, International Monetary Fund.
  3. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  4. Alberto Alesina & Guido Tabellini, 2004. "Bureaucrats or Politicians?," NBER Working Papers 10241, National Bureau of Economic Research, Inc.
  5. Masciandaro, Donato, 2007. "Divide et impera: Financial supervision unification and central bank fragmentation effect," European Journal of Political Economy, Elsevier, vol. 23(2), pages 285-315, June.
  6. Bevger, H. & Haan, J. de & Eijffinger, S.C.W., 2000. "Central Bank Independence: An Update of Theory and Evidence," Open Access publications from Tilburg University urn:nbn:nl:ui:12-82768, Tilburg University.
  7. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
  8. Marco Arnone & Bernard J Laurens & Jean-Fran�ois Segalotto & Martin Sommer, 2009. "Central Bank Autonomy: Lessons from Global Trends," IMF Staff Papers, Palgrave Macmillan, vol. 56(2), pages 263-296, June.
  9. Eijffinger, Sylvester C W & Hoeberichts, Marco & Schaling, Eric, 2000. "A Theory of Central Bank Accountability," CEPR Discussion Papers 2354, C.E.P.R. Discussion Papers.
  10. Michael Taylor & Marc Quintyn & Silvia Ramirez, 2007. "The Fear of Freedom: Politicians and the Independence and Accountability of Financial Sector Supervisors," IMF Working Papers 07/25, International Monetary Fund.
  11. International Monetary Fund, 2006. "Regulatory Capture in Banking," IMF Working Papers 06/34, International Monetary Fund.
  12. Michael Taylor & Marc Quintyn, 2002. "Regulatory and Supervisory Independence and Financial Stability," IMF Working Papers 02/46, International Monetary Fund.
  13. Donato Masciandaro, 2006. "E Pluribus Unum? Authorities' Design in Financial Supervision: Trends and Determinants," Open Economies Review, Springer, vol. 17(1), pages 73-102, January.
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Citations

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Cited by:
  1. Franka Liedorp & Robert Mosch & Carin van der Cruijsen & Jakob de Haan, 2011. "Transparency of banking supervisors," DNB Working Papers 297, Netherlands Central Bank, Research Department.
  2. Mario Tonveronachi, 2010. "Empowering supervisors with more principles and discretion to implement them will not reduce the dangers of the prudential approach to financial regulation," PSL Quarterly Review, Economia civile, vol. 63(255), pages 363-378.
  3. Masciandaro, Donato & Nieto, Maria J. & Quintyn, Marc, 2011. "Exploring governance of the new European Banking Authority—A case for harmonization?," Journal of Financial Stability, Elsevier, vol. 7(4), pages 204-214, December.
  4. Charles Goodhart, 2011. "The Macro-Prudential Authority: Powers, Scope and Accountability," FMG Special Papers sp203, Financial Markets Group.
  5. Dumiter Florin Cornel, 2012. "Empirical Approach Upon The Relationship Between Central Bank Independence And Inflation In Developed And Developing Countries," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 803-808, July.
  6. Zenathan Hasannudin, 2012. "The structure of bank supervision and corruption in lending: a study for transition economies," Post-Print dumas-00802139, HAL.
  7. Marc Quintyn & Rosaria Vega Pansini & Donato Masciandaro, 2011. "The Economic Crisis: Did Financial Supervision Matter?," IMF Working Papers 11/261, International Monetary Fund.
  8. Barry Eichengreen & Nergiz Dincer, 2011. "Who Should Supervise? The Structure of Bank Supervision and the Performance of the Financial System," NBER Working Papers 17401, National Bureau of Economic Research, Inc.
  9. Marc Quintyn, 2009. "Independent agencies: more than a cheap copy of independent central banks?," Constitutional Political Economy, Springer, vol. 20(3), pages 267-295, September.
  10. Melecky, Martin & Podpiera, Anca Maria, 2012. "Institutional structures of financial sector supervision, their drivers and emerging benchmark models," MPRA Paper 37059, University Library of Munich, Germany.
  11. Cukierman, Alex, 2011. "Reflections on the crisis and on its lessons for regulatory reform and for central bank policies," Journal of Financial Stability, Elsevier, vol. 7(1), pages 26-37, January.
  12. Klomp, Jeroen & de Haan, Jakob, 2009. "Central bank independence and financial instability," Journal of Financial Stability, Elsevier, vol. 5(4), pages 321-338, December.
  13. Marc Quintyn & Donato Masciandaro & María Nieto, 2009. "Will they Sing the Same Tune? Measuring Convergence in the new European System of Financial Supervisors," IMF Working Papers 09/142, International Monetary Fund.

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