Central Bank Independence and Sacrifice Ratios: Some Further Considerations
AbstractThe existing literature reports a positive relationship between sacrifice ratios and central bank independence. This paper discusses two critical points related to the usual procedures employed by this literature. One concerns the issue of non-stationarity of the inflation rate, the other the problem of correlation between the error terms for different disinflation episodes in the same country. The way in which the sacrifice ratio-central bank independence relationship is tested is reconsidered taking into account these points. Our results shed considerable doubts on the nature and robustness of such a relationship and on the usual interpretation given to it in the literature. Copyright Kluwer Academic Publishers 2000
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 11 (2000)
Issue (Month): 2 (April)
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Web page: http://www.springerlink.com/link.asp?id=100323
central bank independence; sacrifice ratio; stationarity of inflation; panel data estimation;
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