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Central bank independence and inflation performance: panacea or placebo?

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  • M.A. JENKINS

    (University of Hull)

Abstract

A great deal of recent attention has been devoted towards the relationship between central bank independence and economic performance. The degree of central bank independence is said to determine cross-country inflation differences. However, several factors have been raised that cast doubts on such a relationship. First, the link between independence and inflation may not be as tight as previously declared. Also, predictive validity tests show that the link does not score favourably. Relevant variables also appear to have been omitted in using central bank independence as the determinant of cross-country inflation differences. This paper investigates the stylised facts regarding central bank independence and inflation performance. The structure of the labor market, the regulatory burden of the central bank and the exchange rate regime are found to be significant determinants as well.

Suggested Citation

  • M.A. Jenkins, 1996. "Central bank independence and inflation performance: panacea or placebo?," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 49(197), pages 241-270.
    • Handle: RePEc:psl:bnlaqr:1996:25
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10614/10498
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    Cited by:

    1. James Forder, 2000. "Traps in the Measurement of Independence and Accountability of Central Banks," Economics Series Working Papers 23, University of Oxford, Department of Economics.
    2. Mr. Bernard J Laurens & Mr. Marco Arnone & Jean-François Segalotto, 2006. "The Measurement of Central Bank Autonomy: Survey of Models, Indicators, and Empirical Evidence," IMF Working Papers 2006/227, International Monetary Fund.
    3. Carlos Esteban Posada & cposadpo@banrep.gov.co, 1996. "La Credibilidad de la Política Anti-Inflacionaria," Borradores de Economia 066, Banco de la Republica de Colombia.
    4. Jeroen Klomp & Jakob De Haan, 2010. "Inflation And Central Bank Independence: A Meta‐Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 593-621, September.
    5. Anis Chowdhury & Jomo Kwame Sundaram, 2023. "Inflation and Development: Central Bank Stabilization Policies Revisited," Development, Palgrave Macmillan;Society for International Deveopment, vol. 66(1), pages 3-14, June.
    6. J. De Haan & W. Kooi, 1997. "What really matters: conservativeness or independence?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 50(200), pages 23-38.
    7. Franz R. Hahn & Peter Mooslechner, 1999. "Zur Fundierung des Designs des Europäischen Zentralbanksystems," WIFO Monatsberichte (monthly reports), WIFO, vol. 72(1), pages 49-60, January.
    8. Brian Snowdon & Howard R. Vane, 1999. "The New Political Macroeconomics: An Interview with Alberto Alesina," The American Economist, Sage Publications, vol. 43(1), pages 19-34, March.
    9. 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.

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    More about this item

    Keywords

    Inflation; Central banks;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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