Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s

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Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s

Author Info

Andreas Freytag () (University of Jena, School of Busniess and Economics)
Friedrich Schneider () (Department of Economics, Johannes Kepler University Linz)

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Abstract

Central bank independence (CBI) is a very important precondition for price stability. However, the empirical evidence for a correlation between both is relatively weak. In this paper, this weakness is countered with a) an extended measure of monetary commitment, which includes well-known criteria for CBI and external criteria such as convertibility and exchange rate regimes and b) the argument that monetary commitment can grant price stability best if it is backed by an adequate assignment of economic policy. An empirical assessment with data from four decades confirms the crucial role of monetary commitment for price stability.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek in its series Jena Economic Research Papers with number 2007-002.

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Date of creation: 30 Mar 2007
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Handle: RePEc:jrp:jrpwrp:2007-002

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Paper
- Andreas Freytag & Friedrich Schneider, 2007. "Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]

Find related papers by JEL classification:
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-04-21 (All new papers)
NEP-CBA-2007-04-21 (Central Banking)
NEP-HIS-2007-04-21 (Business, Economic & Financial History)
NEP-MAC-2007-04-21 (Macroeconomics)
NEP-MON-2007-04-21 (Monetary Economics)

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