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Does central bank independence reflect monetary commitment properly? Methodical considerations

  • Andreas Freytag

    ()

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

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.

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File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9931/9813
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Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

Volume (Year): 54 (2001)
Issue (Month): 217 ()
Pages: 181-208

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Handle: RePEc:psl:bnlaqr:2001:22
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