IDEAS home Printed from https://ideas.repec.org/a/ora/journl/v1y2011i1p487-493.html
   My bibliography  Save this article

Central Bank Independence And Macroeconomic Performances - An Empirical Approach

Author

Listed:
  • Dumiter Florin Cornel

    () (Vasile Goldis Western University of Arad, Economic Sciences)

  • Coroiu Sorina

    () (University of Oradea, Economic Sciences)

Abstract

The empirical evidence upon the macroeconomic performances of the independent central banks do not always have been successfully. In some cases, the consistency of the indices based on the interpretation of central banks statues used for measuring the degree of central bank independence is controversial, particularly for some of the indices. Moreover, the correlations between central bank independence and macroeconomic performance variables are not always confirmed, the causal relationship between central bank independence and inflation is controversial, and the higher disinflation costs, as a result of a higher sacrifice ratio correlated with the degree of independence is controversial, too. The effects of central bank independence upon macroeconomic performances focalized upon the empirical evidence of inflation, output or economic grouth and the disinflation costs. This is due to the lack of studies vis - á - vis of relationship between central bank independence and macroeconomic performances regarding some variables like interest rates and budgetary deficits. Specialists consider inflation and output as the main determinats of the social welfare. The economic literature regarding this fact suggests that the central bank is seen as a free lunch institution. This hypothesis sustains that independent central banks will have social benefits in terms of lower inflation rates, but without any costs in terms of the real macroeconomic performances as a higher output volatility or a lower economic growth. In this article we provide a qualitative analyses regarding the relationship between central bank independence and macroeconomic performances. For this purpose the authors' used the new index for measuring central bank independence and inflation targeting based on three pillars: political and legal central bank independence, central bank governance and conduct of monetary policy, central bank transparency and accountability. For estimating the connections between the evolution of central bank independence and macroeconomic performances we used five macroeconomic variables: GDP in constant prices, Harmonised Price Consumer Index, unemployment rate, budgetary deficit and current account deficit. Both measuring the degree of central bank independence and evaluating the average levels of the macroeconomic variables were analysed in the period 1990 - 2009, within 20 less developing countries. The final results will help clarify the complex relationship between central bank independence and macroeconomic performances in countries who fostered a large amount of institutional shift in recent years.

Suggested Citation

  • Dumiter Florin Cornel & Coroiu Sorina, 2011. "Central Bank Independence And Macroeconomic Performances - An Empirical Approach," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 487-493, July.
  • Handle: RePEc:ora:journl:v:1:y:2011:i:1:p:487-493
    as

    Download full text from publisher

    File URL: http://anale.steconomiceuoradea.ro/volume/2011/n1/044.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Stephen G. Cecchetti & Stefan Krause, 2002. "Central bank structure, policy efficiency, and macroeconomic performance: exploring empirical relationships," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 47-60.
    2. Patricia S. Pollard, 1993. "Central bank independence and economic performance," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 21-36.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Central bank transparency; central bank accountability; inflation targeting; macroeconomic outcomes; free lunch hypothesis;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ora:journl:v:1:y:2011:i:1:p:487-493. 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: (Catalin ZMOLE). General contact details of provider: http://edirc.repec.org/data/feoraro.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.