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Reconsidering the Principal Components of Central Bank Independence: The More the Merrier?

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  • Banaian, King
  • Burdekin, Richard C K
  • Willett, Thomas D

Abstract

The authors use principal component analysis to reassess the link between different attributes of central bank independence and inflation performance. They suggest that coding problems may account for the fact that almost none of the attributes included in the Cukierman index has a systematic, plausible relationship with inflation. The multifaceted Cukierman index also seems to be outperformed by a much narrower index focusing solely on policy independence. These findings point to the importance of using public choice analysis to isolate the real problem here: namely, finding specific central bank structures that effectively insulate central bankers from political pressures. Copyright 1998 by Kluwer Academic Publishers

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  • Banaian, King & Burdekin, Richard C K & Willett, Thomas D, 1998. "Reconsidering the Principal Components of Central Bank Independence: The More the Merrier?," Public Choice, Springer, vol. 97(1-2), pages 1-12, October.
  • Handle: RePEc:kap:pubcho:v:97:y:1998:i:1-2:p:1-12
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    Cited by:

    1. Alesina, Alberto & Stella, Andrea, 2010. "The Politics of Monetary Policy," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 18, pages 1001-1054 Elsevier.
    2. Aleksandra Maslowska, 2007. "Discussion on the Inconsistency of Central Bank Independence Measures," Discussion Papers 21, Aboa Centre for Economics.
    3. Alesina, Alberto Francesco, 2008. "Comments on "When Do Policy Reforms Work?' by Daron Acemoglu et al," Scholarly Articles 12553722, Harvard University Department of Economics.
    4. Siklos, Pierre L., 2008. "No single definition of central bank independence is right for all countries," European Journal of Political Economy, Elsevier, vol. 24(4), pages 802-816, December.
    5. Berlemann, Michael & Hielscher, Kai, 2011. "A Time-varying Indicator of Effective Monetary Policy Conservatism," Working Paper 112/2011, Helmut Schmidt University, Hamburg.
    6. Pavel Trunin & Kniazev Dmitriy & Satdarov Alexandr, 2010. "Analysis of independence of the central banks of the Russian Federation, the CIS and East European countries," Research Paper Series, Gaidar Institute for Economic Policy, issue 133P.
    7. Michael Berlemann & Kai Hielscher, 2016. "Measuring Effective Monetary Policy Conservatism of Central Banks: A Dynamic Approach," Annals of Economics and Finance, Society for AEF, vol. 17(1), pages 105-132, May.
    8. King Banaian, 2007. "Measuring Central Bank Independence: Ordering, Ranking, or Scoring?," Working Papers 2008-3 Classification-E58, Saint Cloud State University, Department of Economics, revised 28 Feb 2008.
    9. Bilin Neyapti, 2010. "Macroeconomic Institutions and Development," Books, Edward Elgar Publishing, number 12960, April.
    10. repec:kap:iaecre:v:6:y:2000:i:2:p:127-149 is not listed on IDEAS
    11. Aleksandra Maslowska, 2008. "Quest for the best: How to measure central bank independence and show its relation with inflation?," Discussion Papers 37, Aboa Centre for Economics.
    12. Richard C. K. Burdekin & Leroy O. Laney, 2016. "Fiscal policymaking and the central bank institutional constraint Una Vez Más: New Latin American evidence," Public Choice, Springer, vol. 167(3), pages 277-289, June.
    13. Axel Gerloff, 2000. "Stylized facts about stabilization in central and eastern Europe," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(2), pages 127-149, May.
    14. Richard C.K. Burdekin & King Banaian & Mark Hallerberg & Pierre L. Siklos, 2011. "Fiscal and monetary institutions and policies: onward and upward?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(4), pages 340-354, November.
    15. Siklos, Pierre L., 2000. "Monetary policy transparency, public commentary, and market perceptions about monetary policy in Canada," Discussion Paper Series 1: Economic Studies 2000,08, Deutsche Bundesbank, Research Centre.
    16. Martin T. Bohl & David G. Mayes & Pierre L. Siklos, 2011. "The Quality Of Monetary Policy And Inflation Performance: Globalization And Its Aftermath," Manchester School, University of Manchester, vol. 79(s1), pages 617-645, June.
    17. Bilin Neyapti, 2003. "Budget Deficits and Inflation: The Roles of Central Bank Independence and Financial Market Development," Contemporary Economic Policy, Western Economic Association International, vol. 21(4), pages 458-475, October.
    18. Kari Heimonen & Aleksandra Maslowska-Jokinen, 2014. "Central bank independence and sovereign debt crisis. Any link?," Discussion Papers 93, Aboa Centre for Economics.

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