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The Measurement of Central Bank Autonomy

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Author Info

  • Bernard Laurens
  • Marco Arnone
  • Jean-François Segalotto

Abstract

This paper presents a survey of the literature on the measurement of central bank autonomy. We distinguish inputs that constitute the building blocks in the literature, and the literature that builds on them. Issues including sensitivity analysis, robustness, and endogeneity are discussed. The review shows that empirical evidence regarding the beneficial effects of central bank autonomy is substantial, although some technical issues still remain for further research. In particular, central bank autonomy raises the issue of subjecting the monetary authorities to democratic control; this calls for additional research on the linkages between central bank autonomy and accountability and transparency. Additional empirical analysis on the relationship between the financial strength of the central bank and its de facto autonomy, and between its autonomy and financial stability, would also be desirable.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/227.

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Length: 83
Date of creation: 01 Oct 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/227

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Related research

Keywords: Central bank autonomy; Economic growth; Economic models; inflation; monetary policy; central bank; price stability; inflation performance; average inflation; macroeconomic performance; inflation rate; inflation rates; monetary institutions; money supply; high inflation; inflation tax; low inflation; real interest rates; monetary stability; money growth; monetary financing; monetary policy instruments; monetary base; monetary fund; money stock; financial stability; average inflation rate; monetary policy objectives; inflationary impact; money market; rate of inflation; monetary authorities; lower inflation; low levels of inflation; monetary policy reaction functions; monetary authority; monetary policies; monetary instruments; real wages; inflationary consequences; monetary system; inflation aversion; monetary economics; inflation targeting; foreign exchange; monetary expansion; terms of trade; monetary policy decisions; discretionary monetary policy; monetary targets; monetary regime; price level; rates of inflation; inflationary expectations; distribution of inflation; reserve requirements; increase in interest rates; annual inflation; discount rate; monetary decisions; monetary policy strategies; real output; moderate inflation; monetary policy reaction function; money market interest rates; monetary institution; autonomous monetary policy; change in inflation; rational expectations; monetarism; intermediate monetary target; real rates; macroeconomic stability; monetary regimes; inflation objective; inflation data; real interest rate; inflationary pressures; monetary expansions; monetary autonomy; demand for money; monetary control; monetary target; monetary policy autonomy; reduction in inflation; monetary policy rules; inflation target; monetary economy;

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References

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  1. T.F. Cargill, 1995. "The statistical association between central bank independence and inflation," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 48(193), pages 159-172.
  2. Alesina, Alberto & Gatti, Roberta, 1995. "Independent Central Banks: Low Inflation at No Cost?," American Economic Review, American Economic Association, vol. 85(2), pages 196-200, May.
  3. Alan S. Blinder, 2000. "Central-Bank Credibility: Why Do We Care? How Do We Build It?," American Economic Review, American Economic Association, vol. 90(5), pages 1421-1431, December.
  4. T.F. Cargill, 1995. "The statistical association between central bank independence and inflation," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 48(193), pages 159-172.
  5. M.A. Jenkins, 1996. "Central bank independence and inflation performance: panacea or placebo?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 49(197), pages 241-270.
  6. Oatley, Thomas, 1999. " Central Bank Independence and Inflation: Corporatism, Partisanship, and Alternative Indices of Central Bank Independence," Public Choice, Springer, vol. 98(3-4), pages 399-413, March.
  7. Hafiz A. Akhand, 1998. "Central Bank Independence and Growth: A Sensitivity Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 31(2), pages 303-317, May.
  8. Jean-François Segalotto & Marco Arnone & Bernard Laurens, 2006. "Measures of Central Bank Autonomy," IMF Working Papers 06/228, International Monetary Fund.
  9. Bindseil, Ulrich & Manzanares, Andrés & Weller, Benedict, 2004. "The role of central bank capital revisited," Working Paper Series 0392, European Central Bank.
  10. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  11. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
  12. Cukierman, Alex & Lippi, Francesco, 1999. "Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence," European Economic Review, Elsevier, vol. 43(7), pages 1395-1434, June.
  13. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
  14. Alain Ize, 2005. "Capitalizing Central Banks," IMF Working Papers 05/15, International Monetary Fund.
  15. McCallum, Bennett T, 1995. "Two Fallacies Concerning Central-Bank Independence," American Economic Review, American Economic Association, vol. 85(2), pages 207-11, May.
  16. M.A. Jenkins, 1996. "Central bank independence and inflation performance: panacea or placebo?," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 49(197), pages 241-270.
  17. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
  18. Grubb, David B. & Jackman, Richard & Layard, Richard, 1983. "Wage rigidity and unemployment in OECD countries," European Economic Review, Elsevier, vol. 21(1-2), pages 11-39.
  19. Andreas Fischer, 1996. "Central bank independence and sacrifice ratios," Open Economies Review, Springer, vol. 7(1), pages 5-18, January.
  20. Forder, James, 1998. "The case for an independent European central bank: A reassessment of evidence and sources," European Journal of Political Economy, Elsevier, vol. 14(1), pages 53-71, February.
  21. Peter Stella, 1997. "Do Central Banks Need Capital?," IMF Working Papers 97/83, International Monetary Fund.
  22. Guy Debelle, 1996. "The Ends of Three Small Inflations: Australia, New Zealand and Canada," Canadian Public Policy, University of Toronto Press, vol. 22(1), pages 56-78, March.
  23. Kilponen, Juha, 1999. "Central Bank Independence and Wage Bargaining Structure - Empirical Evidence," Research Discussion Papers 9/1999, Bank of Finland.
  24. Cukierman, Alex & Kalaitzidakis, Pantelis & Summers, Lawrence H. & Webb, Steven B., 1993. "Central bank independence, growth, investment, and real rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 95-140, December.
  25. Marta Campillo & Jeffrey A. Miron, 1997. "Why Does Inflation Differ across Countries?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 335-362 National Bureau of Economic Research, Inc.
  26. Brumm, Harold J, 2000. "Inflation and Central Bank Independence: Conventional Wisdom Redux," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 807-19, November.
  27. repec:fth:bfsefi:9/99 is not listed on IDEAS
  28. Peter Stella, 2005. "Central Bank Financial Strength, Transparency, and Policy Credibility," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 335-365, September.
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