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Economic and Socio-Political Determinants of de Facto Monetary Institutions and Inflationary Outcomes

Author

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  • Carmignani Fabrizio

    () (United Nations Economic Commission for Africa)

  • Colombo Emilio

    () (University of Milano - Bicocca)

  • Tirelli Patrizio

    () (University of Milano - Bicocca)

Abstract

In this paper we estimate a model where inflation, a measure of de facto central bank independence and an index of de facto exchange rate regime are simultaneously determined by a set of economic, political and institutional variables. De facto central bank independence is hampered by socio-political turbulence and benefits from the balance of powers between the executive and the parliament. Inflation is explained by de facto central bank independence, by the level and volatility of public expenditure and by the de facto exchange rate regime. Openness (real and financial) affects inflation through the exchange rate regime channel. Success in controlling inflation, in turn is crucial to sustain central bank independence and exchange rate stability.

Suggested Citation

  • Carmignani Fabrizio & Colombo Emilio & Tirelli Patrizio, 2008. "Economic and Socio-Political Determinants of de Facto Monetary Institutions and Inflationary Outcomes," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-29, November.
  • Handle: RePEc:bpj:bejmac:v:8:y:2008:i:1:n:29
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    References listed on IDEAS

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    1. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 869-903.
    2. Andres Velasco & Alejandro Neut, 2003. "Tough Policies, Incredible Policies?," NBER Working Papers 9932, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Berggren, Niclas & Daunfeldt, Sven-Olov & Hellström, Jörgen, 2014. "Social trust and central-bank independence," European Journal of Political Economy, Elsevier, vol. 34(C), pages 425-439.
    2. Fabrizio Carmignani & Abdur Chowdhury, 2010. "Why are natural resources a curse in Africa, but not elsewhere?," Discussion Papers Series 406, School of Economics, University of Queensland, Australia.

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