IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Central bank reform, liberalization and inflation in transition economies--an international perspective

  • Cukierman, Alex
  • Miller, Geoffrey P.
  • Neyapti, Bilin

This paper develops extensive new data on the legal independence of new central banks in 26 former socialist economies (FSE).This data is constructed using the codification system for measuring legal independence developed in Cukierman, Webb and Neyapti (1992) and in chapter 19 of Cukierman (1992).This makes it comparable with earlier data on central bank independence (CBI) in the industrial democracies and in, non FSE, developing countries and permits experimentation with alternative indices of CBI like those reviewed in Eijffinger and van Keulen (1995).The new indices of independence indicate that central bank (CB) reform in the FSE during the nineties has been quite ambitious.In spite of the large price shocks induced by the transformation from plan to market, reformers in those countries chose to create central banks with levels of legal independence that are substantially higher, on average, than those of developed economies during the eighties.Based on data from 1989 through 1998 the evidence in the paper suggests that CBI is unrelated to inflation during the early stages of liberalization.But for sufficiently high and sustained levels of liberalization, and controlling for variables like price decontrols and wars, legal CBI and inflation are significantly and negatively related.These findings are consistent with the view that legal CBI, no matter how high, cannot contain the powerful inflationary impact of wide scale liberalization of formerly controlled prices.But once the process of liberalization has gathered sufficient momentum legal independence becomes effective in slowing inflation down and the cumulative liberalization index developed by de Melo et. al.(1996) becomes relatively less important.The paper also presents evidence on factors that affect the level of CBI and examines the relation between inflation and CBI within a broader sample composed of the transition and of the developed economies.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 49 (2002)
Issue (Month): 2 (March)
Pages: 237-264

in new window

Handle: RePEc:eee:moneco:v:49:y:2002:i:2:p:237-264
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Loungani, Prakash & Sheets, Nathan, 1997. "Central Bank Independence, Inflation, and Growth in Transition Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 381-99, August.
  2. Eijffinger, S.C.W. & van Keulen, M., 1995. "Central bank independence in another eleven countries," Other publications TiSEM 32e466b5-7f2a-4856-881a-8, Tilburg University, School of Economics and Management.
  3. Cukierman, Alex & Webb, Steven B, 1995. "Political Influence on the Central Bank: International Evidence," World Bank Economic Review, World Bank Group, vol. 9(3), pages 397-423, September.
  4. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
  5. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  6. Eijffinger, S-C-W & de Haan, J, 1996. "The Political Economy of Central-Bank Independence," Princeton Studies in International Economics 19, International Economics Section, Departement of Economics Princeton University,.
  7. 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.
  8. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, June.
  9. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
  10. Hochreiter, Eduard & Rovelli, Riccardo & Winckler, Georg, 1996. "Central banks and seigniorage: A study of three economies in transition," European Economic Review, Elsevier, vol. 40(3-5), pages 629-643, April.
  11. Conway, P, 1995. "Currency Proliferation : The Monetary Legacy of the Soviet Union," Princeton Essays in International Economics 197, International Economics Section, Departement of Economics Princeton University,.
  12. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  13. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  14. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
  15. Conway, P, 1995. "Currency Proliferation : The Monetary Legacy of the Soviet Union," Princeton Studies in International Economics 197, International Economics Section, Departement of Economics Princeton University,.
  16. Chris Melliss & Mark Cornelius, 1994. "New currencies in the Former Soviet Union: a recipe for hyperinflation or the path to price stability," Bank of England working papers 26, Bank of England.
  17. Eijffinger, S.C.W., 1993. "Central bank independence in twelve industrial countries," Other publications TiSEM 0401b17a-e2c7-4179-ace9-a, Tilburg University, School of Economics and Management.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:49:y:2002:i:2:p:237-264. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.