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Two Essays on Central Bank Independence Reforms

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  • Landström, Mats

    ()
    (Department of Economics, Umeå University)

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    Abstract

    This thesis consists of two empirically oriented papers on Central Bank Independence (CBI) Reforms. Paper [1] is an investigation of why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to control the economy. A new data-set covering 132 countries, of which 89 had implemented CBI reforms during 1980-2005, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country had been characterized by high variability in inflation and if they faced a high probability of being replaced. No such effects were found for OECD countries. Paper [2], using a difference-in-difference approach, studies whether CBI reform matters for inflation performance. The analysis is based on a dataset including the possible occurence of CBI reforms in 132 countries during the period 1980-2005. CBI reform is found to have contributed to bringing down inflation in high-inflation countries, but it seems unrelated to inflation performance in low-inflation countries.

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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 792.

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    Length: 82 pages
    Date of creation: 27 Nov 2009
    Date of revision:
    Handle: RePEc:hhs:umnees:0792

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    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Web page: http://www.econ.umu.se/
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    Related research

    Keywords: Monetary policy; institutional reform; central banking; price stability; political economy; delegation; institutional economics; inflation; time-inconsistency; accountability;

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