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Political monetary cycles and a de facto ranking of central bank independence

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  • Alpanda, Sami
  • Honig, Adam

Abstract

Political monetary cycles are less likely to occur in countries with independent central banks. Independent central banks can withstand political pressure to stimulate the economy before elections or finance election-related increases in government spending. Based on this logic and supporting evidence, we construct a de facto ranking of central bank independence derived from the extent to which monetary policy varies with the electoral cycle. The ranking avoids well-known problems with existing measures of central bank independence and provides independent information about average inflation and inflation volatility differences across countries.

Suggested Citation

  • Alpanda, Sami & Honig, Adam, 2010. "Political monetary cycles and a de facto ranking of central bank independence," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 1003-1023, October.
  • Handle: RePEc:eee:jimfin:v:29:y:2010:i:6:p:1003-1023
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    2. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
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    7. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
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    9. Stephanos Papadamou & Moïse Sidiropoulos & Eleftherios Spyromitros, 2016. "Central Bank Independence and the Dynamics of Public Debt?," Working Papers of BETA 2016-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    10. Belke, Ansgar & Potrafke, Niklas, 2012. "Does government ideology matter in monetary policy? A panel data analysis for OECD countries," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1126-1139.
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