Legal and Actual Central Bank Independence: A Case Study of Bank Indonesia
AbstractIndicators of central bank independence (CBI) based on the interpretation central bank laws in place may not capture the actual independence of the central bank. This paper develops an indicator of actual independence of the Bank Indonesia (BI), the central bank of Indonesia, for the period 1953-2008 and compares it with a new legal CBI indicator based on Cukierman (1992). The indicator of actual independence captures institutional and economic factors that affect CBI. We find that before 1999, legal and actual independence of BI diverged substantially. After a new central bank law was enacted, the legal independence of BI increased and converged to actual independence.
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Bibliographic InfoPaper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 10004.
Date of creation: 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-CBA-2011-01-30 (Central Banking)
- NEP-HIS-2011-01-30 (Business, Economic & Financial History)
- NEP-MON-2011-01-30 (Monetary Economics)
- NEP-SEA-2011-01-30 (South East Asia)
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