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On the determinants of Central Bank independence in open economies

Author

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  • Marcello D'Amato

    (Università di Salerno, Csef, Celpe, Italy)

  • Barbara Pistoresi

    (Università di Modena e Reggio Emila, ReCent, Italy)

  • Francesco Salsano

Abstract

We test some positive implications of the commitment hypothesis for the design of monetary institutions in open economies, by studying the determinants of Central Bank independence on a sample of 55 countries, for the period 1980-1989. We document fairly consistent empirical evidence in support of the hypothesis that strategic commitment is indeed important to understand cross-country variation in the level of Central Bank degree of dependence. We also address the related question why only highly industrialized countries have relied on such a solution to the inflationary bias of monetary policy whereas other countries have not. Data suggest that the answer is related to the presence and the size of world-wide common features in the business cycle at country level. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Marcello D'Amato & Barbara Pistoresi & Francesco Salsano, 2009. "On the determinants of Central Bank independence in open economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 107-119.
    • Handle: RePEc:ijf:ijfiec:v:14:y:2009:i:2:p:107-119
    DOI: 10.1002/ijfe.360
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    1. Barbara Pistoresi & Maddalena Cavicchioli & Giulio Brevini, 2017. "Central Bank Independence, financial instability and politics: new evidence for OECD and non-OECD countries," Department of Economics 0112, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    2. Chee-Hong Law & Chee-Lip Tee & Wei-Theng Lau, 2019. "The Impacts of Financial Integration on the Linkages Between Monetary Independence and Foreign Exchange Reserves," International Economic Journal, Taylor & Francis Journals, vol. 33(2), pages 212-235, April.
    3. Grégory LEVIEUGE & Yannick LUCOTTE, 2012. "A Simple Empirical Measure of Central Bank' Conservatism," LEO Working Papers / DR LEO 2258, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    4. Grégory Levieuge & Yannick Lucotte, 2014. "A Simple Empirical Measure of Central Banks' Conservatism," Southern Economic Journal, John Wiley & Sons, vol. 81(2), pages 409-434, October.
    5. Tadadjeu Wemba, Dessy-Karl & Essiane, Patrick-Nelson Daniel, 2018. "Autonomie des Banques Centrales et Finances Publiques en Afrique subsaharienne [Autonomy of Central Banks and Public Finances in Sub-saharan Africa]," MPRA Paper 100828, University Library of Munich, Germany.
    6. Strong, Christine & Yayi, Constant, 2021. "Central bank independence, fiscal deficits and currency union: Lessons from Africa," Journal of Macroeconomics, Elsevier, vol. 68(C).
    7. Dreher, Axel & Sturm, Jan-Egbert & Haan, Jakob de, 2010. "When is a central bank governor replaced? Evidence based on a new data set," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 766-781, September.
    8. Chee-Hong Law & Chee-Lip Tee & Say Keat Ooi, 2019. "Threshold effect of Financial Integration on Linkages Between Monetary Independence and Foreign Exchange Reserves," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 15(1), pages 61-81.
    9. Pistoresi B. & Cavicchioli M. & Brevini G., 2017. "Central Bank Independence, Financial Instability and Politics: New Evidence for OECD and Non-OECD Countries," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(7), pages 179-188, July.
    10. Barbara Pistoresi & Maddalena Cavicchioli & Giulio Brevini, 2017. "Central Bank Independence, financial instability and politics: new evidence for OECD and non-OECD countries," Center for Economic Research (RECent) 129, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    11. Diouf, Ibrahima & Pépin, Dominique, 2017. "Gender and central banking," Economic Modelling, Elsevier, vol. 61(C), pages 193-206.

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