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Inflation Performance and Constitutional Central Bank Independence. Evidence from Latin America and the Caribbean

  • Eva Gutiérrez

    ()

    (Monetary Exchange and Affairs Department, International Monetary Fund)

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    This paper explores the relationship between the constitutional entrenchment of central bank independence and inflation performance. Empirical studies for developing countries have not found a relationship between central bank independence, proxied by the de jure independence established in the central bank law, and inflation. We argue that the Constitution is likely to be better enforced than ordinary statutes owing to its higher legal rank. Our empirical analysis finds that in a sample of Latin American and Caribbean countries, those countries that entrench the independence of the central bank in the Constitution have a better inflation performance.

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    File URL: http://www.economiamexicana.cide.edu/num_anteriores/XIII-2/EVA_GUTIERREZ.pdf
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    Article provided by in its journal Economia Mexicana NUEVA EPOCA.

    Volume (Year): XIII (2004)
    Issue (Month): 2 (July-December)
    Pages: 255-287

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    Handle: RePEc:emc:ecomex:v:13:y:2004:i:2:p:255-287
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    1. 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.
    2. 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.
    3. Cukierman, A. & Miller, G.P. & Neyapti, B., 2000. "Central Bank Rerform, Liberalization and Inflation in Transition Economies - an International Perspective," Papers 2000-19, Tel Aviv.
    4. Haan, Jakob de & Kooi, Willem J., 2000. "Does central bank independence really matter?: New evidence for developing countries using a new indicator," Journal of Banking & Finance, Elsevier, vol. 24(4), pages 643-664, April.
    5. Marta Campillo & Jeffrey A. Miron, 1996. "Why Does Inflation Differ Across Countries?," NBER Working Papers 5540, National Bureau of Economic Research, Inc.
    6. Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2001. " Central Bank Independence: An Update of Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 3-40, February.
    7. Al-Marhubi, Fahim & Willett, Thomas D, 1995. " The Anti Inflationary Influence of Corporatist Structures and Central Bank Independence: The Importance of the Hump Shaped Hypothesis," Public Choice, Springer, vol. 84(1-2), pages 153-62, July.
    8. Jakob De Haan & Clemens L.J. Siermann, 1996. "Central bank independence, inflation and political instability in developing countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(2), pages 135-147.
    9. 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.
    10. Andersen, Torben M. & Schneider, Friedrich, 1986. "Coordination of fiscal and monetary policy under different institutional arrangements," European Journal of Political Economy, Elsevier, vol. 2(2), pages 169-191.
    11. Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
    12. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
    13. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "Patterns of Transition from Plan to Market," World Bank Economic Review, World Bank Group, vol. 10(3), pages 397-424, September.
    14. Eijffinger, S.C.W. & de Haan, J., 1996. "Central Bank independence - Only part of the inflation story : A comment," Other publications TiSEM 8afcab3c-9541-44ef-ab3e-6, Tilburg University, School of Economics and Management.
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