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A Historical Analysis of Central Bank Independence in Latin America: The Colombian Experience, 1923-2008

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  • Adolfo Meisel

    ()

  • Juan David Barón

    ()

Abstract

This paper explores the relationship between central bank independence and inflation in Latin America, using as a case study the experience of Colombia (1923-2008). Since its creation, in 1923, Colombia´s central bank has undergone several reforms that have changed its objectives and degree of independence. Between 1923 and 1951, it was private and independent, with a legal commitment to price stability. In 1962 monetary responsibilities were divided between a government-dominated Monetary Board, in charge of monetary policy, and the central bank, which carried them out. In the early 1990s, the bank recovered its independence and its focus on price stability. Inflation varied substantially during these subperiods. The analysis shows that central bank independence, combined with a commitment to price stability, renders the best results in terms of price stability.

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Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 005788.

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Length: 29
Date of creation: 06 Sep 2009
Date of revision:
Handle: RePEc:col:000094:005788

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Keywords: Central bank; independece; structural break; Colombia.;

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  1. Christopher Crowe & Ellen E. Meade, 2007. "Central Bank Independence and Transparency: Evolution and Effectiveness," Working Papers 2007-20, American University, Department of Economics.
  2. Christopher W. Crowe & Ellen E. Meade, 2008. "Central Bank Independence and Transparency," IMF Working Papers 08/119, International Monetary Fund.
  3. Eva Gutierrez, 2003. "Inflation Performance and Constitutional Central Bank Independence," IMF Working Papers 03/53, International Monetary Fund.
  4. 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.
  5. Cukierman, Alex, 2007. "Central Bank Independence and Monetary Policymaking Institutions - Past Present and Future," CEPR Discussion Papers 6441, C.E.P.R. Discussion Papers.
  6. José Manuel Restrepo, 2000. "Central Bank Independence and inflation: the case of Colombia. 1924 - 1998," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  7. Daunfeldt, Sven-Olov & de Luna, Xavier, 2002. "Central Bank Independence and Price Stability: Evidence from 23 OECD-countries," UmeÃ¥ Economic Studies 589, Umeå University, Department of Economics, revised 12 Jun 2003.
  8. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  9. Rockoff, Hugh, 1974. "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(2), pages 141-67, May.
  10. Jácome, Luis I. & Vázquez, Francisco, 2008. "Is there any link between legal central bank independence and inflation? Evidence from Latin America and the Caribbean," European Journal of Political Economy, Elsevier, vol. 24(4), pages 788-801, December.
  11. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  12. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, vol. 73(5), pages 1080-91, December.
  13. Otero, Jesus & Ramirez, Manuel, 2006. "Inflation before and after central bank independence: The case of Colombia," Journal of Development Economics, Elsevier, vol. 79(1), pages 168-182, February.
  14. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  15. Andrés Felipe Giraldo Palomino, 2007. "Aspectos institucionales de la banca central en Colombia 1963-2004: la junta monetaria y la junta directiva del Banco de la República," DOCUMENTOS DE ECONOMÍA 004448, UNIVERSIDAD JAVERIANA - BOGOTÁ.
  16. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
  17. Haan, Jakob de & Kooi, Willem J., 2000. "Does central bank independence really matter?: New evidence for developing countries using a new indicator," Journal of Banking & Finance, Elsevier, vol. 24(4), pages 643-664, April.
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  1. > Economic History > Regional Economic History > Latin American Economic History

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