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Does central bank independence reflect monetary commitment properly? Methodical considerations

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  • Andreas Freytag

    (UniversitŠt zu Kšln, Institut FŸr Wirtscha'tspolitik, Kšln (Germany))

Abstract

Central bank independence (CBI) has attracted much attention in economics and politics in recent years. The concept is based on the political economy literature onmonetary policy. In this paper, we argue that CBI is an incomplete approximation to legal monetary commitment. We first discuss the nature and criteria ofcommitment, then show the shortcomings of the most important indices of CBI before we introduce an alternative measure of legal monetary commitment. This measure is more comprehensive and includes more aspects of commitment than the indices of CBI. A first empirical comparison of this index and a leading CBI index strengthens the argument.

Suggested Citation

  • Andreas Freytag, 2001. "Does central bank independence reflect monetary commitment properly? Methodical considerations," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 54(217), pages 181-208.
  • Handle: RePEc:psl:bnlaqr:2001:22
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    Cited by:

    1. Masciandaro, Donato & Volpicella, Alessio, 2016. "Macro prudential governance and central banks: Facts and drivers," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 101-119.
    2. Belke, Ansgar & Freytag, Andreas & Keil, Jonas & Schneider, Friedrich, 2014. "The credibility of monetary policy announcements: Empirical evidence for OECD countries since the 1960s," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 217-227.
    3. Andreas Freytag, 2005. "The credibility of monetary reform – New evidence," Public Choice, Springer, vol. 124(3), pages 391-409, September.
    4. Bernd Hayo & Stefan Voigt, 2008. "Inflation, Central Bank Independence, and the Legal System," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(4), pages 751-777, December.
    5. Libich, Jan & Nguyen, Dat Thanh & Stehlík, Petr, 2015. "Monetary exit and fiscal spillovers," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 184-206.
    6. Andreas Freytag & Friedrich Schneider, 2007. "Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s," Jena Economic Research Papers 2007-002, Friedrich-Schiller-University Jena.
    7. Andreas Freytag, 2004. "EMU Enlargement: Which Concept of Convergence to Apply?," Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) 11/2004, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
    8. Carlos Esteban Posada, 2002. "La inflación y el Banco Central: Economía de un emisor independiente," Revista Cuadernos de Economía, Universidad Nacional de Colombia -FCE - CID, June.
    9. Ansgar Belke & Andreas Freytag & Jonas Keil & Friedrich Schneider, 2012. "The Credibility of Monetary Policy Announcements – Empirical Evidence for OECD Countries since the 1960s," Ruhr Economic Papers 0355, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Donato Masciandaro, 2018. "Central Banks And Macroprudential Policies: Economics And Politics," BAFFI CAREFIN Working Papers 1878, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    11. repec:zbw:rwirep:0355 is not listed on IDEAS
    12. Marc-André Gosselin, 2007. "Central Bank Performance under Inflation Targeting," Staff Working Papers 07-18, Bank of Canada.

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    More about this item

    Keywords

    Monetary Policy; Monetary; Policy;
    All these keywords.

    JEL classification:

    • 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

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