Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s
AbstractCentral 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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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-002.
Date of creation: 30 Mar 2007
Date of revision:
central bank independence; price stability; monetary commitment;
Other versions of this item:
- Andreas Freytag & Friedrich Schneider, 2007. "Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s," CESifo Working Paper Series 2001, CESifo Group Munich.
- 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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