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Any Link Between Legal Central Bank Independence and Inflation? Evidence From Latin America and the Caribbean

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  • Luis Ignacio Jácome
  • Francisco F. Vázquez

Abstract

This paper reviews central bank legislation in 24 countries in Latin America and the Caribbean during the 1990s. Using panel regressions, we find a negative relationship between legal central bank independence (CBI) and inflation. This result holds for three alternative measures of CBI and after controlling for international inflation, banking crises, and exchange regimes. The result is also robust to the inclusion of a broader indicator of structural reforms that usually go along with changes in central bank legislation, illustrating the complementary nature of various aspects of economic reform. The paper fails, however, to find a causal relationship running from CBI to inflation.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/75.

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Length: 41
Date of creation: 01 Apr 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/75

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Keywords: Central bank legislation; Latin America; Central bank role; Structural adjustment; central bank; inflation; central banks; monetary policy; monetary fund; public debt; discount rate; monetary instruments; monetary economics; money demand; public sector debt; commercial bank loans; intermediate monetary target; open market operations; monetary institutions; monetary system; monetary systems; monetary target; monetary program; currency board; government securities;

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  1. > Political Economy > The Political Economy of Latin America
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