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Central Bank Independence, Economic Freedom, and Inflation Rates

Author

Listed:
  • Banaian, King
  • Luksetich, William A

Abstract

Measures of central bank independence combine many attributes that may or may not affect inflation. Central bank attributes are chosen as a result of political calculations over the distribution of resources between competing interest groups. Simultaneity bias results from regressions of central bank independence or of economic and political freedom on inflation or growth. Our estimates demonstrate the connections between economic and political freedom and central bank attributes that lead to inflation. Countries showing high degrees of economic freedom adopt structures that lead to lower inflation; those that show high degrees of political freedom do not adopt inflation-reducing institutional structures. Copyright 2001 by Oxford University Press.

Suggested Citation

  • Banaian, King & Luksetich, William A, 2001. "Central Bank Independence, Economic Freedom, and Inflation Rates," Economic Inquiry, Western Economic Association International, vol. 39(1), pages 149-161, January.
  • Handle: RePEc:oup:ecinqu:v:39:y:2001:i:1:p:149-61
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    Citations

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    Cited by:

    1. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.
    2. Sang-Heui Lee & Jay Wyk, 2015. "National institutions and logistic performance: a path analysis," Service Business, Springer;Pan-Pacific Business Association, vol. 9(4), pages 733-747, December.
    3. Erdinc Telatar & Funda Telatar & Tarkan Cavusoglu & Umur Tosun, 2010. "Political instability, political freedom and inflation," Applied Economics, Taylor & Francis Journals, vol. 42(30), pages 3839-3847.
    4. Donato Masciandaro & Davide Romelli, 2017. "Optimal Currency Area and European Monetary Membership: Economics and Political Economy," BAFFI CAREFIN Working Papers 1760, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    5. Aleksandra Maslowska, 2007. "Discussion on the Inconsistency of Central Bank Independence Measures," Discussion Papers 21, Aboa Centre for Economics.
    6. 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.
    7. Jeffrey Edwards, 2006. "Politics, Inflation, and the Mundell-Tobin Effect," Journal of Economic Insight (formerly the Journal of Economics (MVEA)), Missouri Valley Economic Association, vol. 32(2), pages 9-30.
    8. Donato Masciandaro & Davide Romelli, 2019. "Behavioral Monetary Policymaking: Economics, Political Economy and Psychology," World Scientific Book Chapters,in: Behavioral Finance The Coming of Age, chapter 9, pages 285-329 World Scientific Publishing Co. Pte. Ltd..
    9. Marc Quintyn, 2009. "Independent agencies: more than a cheap copy of independent central banks?," Constitutional Political Economy, Springer, vol. 20(3), pages 267-295, September.
    10. 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.
    11. repec:bla:ecopol:v:30:y:2018:i:3:p:340-365 is not listed on IDEAS
    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. 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.
    14. Donato Masciandaro & Davide Romelli, 2018. "To Be or not to Be a Euro Country? The Behavioural Political Economics of Currency Unions," BAFFI CAREFIN Working Papers 1883, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    15. repec:rnd:arjebs:v:2:y:2011:i:4:p:125-130 is not listed on IDEAS
    16. 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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