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Does central bank independence reflect monetary commitment properly? Methodical considerations

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  • Andreas Freytag

    ()
    (UniversitŠt zu Kšln, Institut FŸr Wirtscha'tspolitik, Kšln (Germany))

Abstract

Central bank independence (CBI) has attracted much attention in economics and politics in recent years. The concept is based on the political economy literature onmonetary policy. In this paper, we argue that CBI is an incomplete approximation to legal monetary commitment. We first discuss the nature and criteria ofcommitment, then show the shortcomings of the most important indices of CBI before we introduce an alternative measure of legal monetary commitment. This measure is more comprehensive and includes more aspects of commitment than the indices of CBI. A first empirical comparison of this index and a leading CBI index strengthens the argument.

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Bibliographic Info

Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

Volume (Year): 54 (2001)
Issue (Month): 217 ()
Pages: 181-208

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Handle: RePEc:psl:bnlaqr:2001:22

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Keywords: Monetary Policy; Monetary; Policy;

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Citations

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Cited by:
  1. Andreas Freytag, 2005. "The credibility of monetary reform – New evidence," Public Choice, Springer, vol. 124(3), pages 391-409, September.
  2. Ansgar Belke & Andreas Freytag & Jonas Keil & Friedrich Schneider, 2012. "The Credibility of Monetary Policy Announcements – Empirical Evidence for OECD Countries since the 1960s," Ruhr Economic Papers 0355, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Bernd Hayo & Stefan Voigt, 2008. "Inflation, Central Bank Independence, and the Legal System," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(4), pages 751-777, December.
  4. Marc-André Gosselin, 2007. "Central Bank Performance under Inflation Targeting," Working Papers 07-18, Bank of Canada.
  5. Andreas Freytag & Friedrich Schneider, 2007. "Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s," Jena Economic Research Papers 2007-002, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  6. Andreas Freytag, 2004. "EMU Enlargement: Which Concept of Convergence to Apply?," Jenaer Schriften zur Wirtschaftswissenschaft 11/2004, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.

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