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Why Do Politicians Implement Central Bank Independence Reforms?

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  • Daunfeldt, Sven-Olov

    (The Swedish Retail Institute (HUI))

  • Hellström, Jörgen

    (Department of Economics)

  • Landström, Mats

    (Department of Economics)

Abstract

It is something of a puzzle that politicians around the world have chosen to give up power to independent central banks, thereby reducing their possibilities to fine-tune the economy. In this paper the determinants of central bank independence (CBI) reforms are studied using a new data set on the possible event of such reforms in 119 countries. According to the data, as much as 81 countries had implemented CBI-reforms during the study period. The results indicate, moreover, that policymakers are more likely to delegate power to independent central banks when the foreign debt is relatively high. In non-OECD countries, the likelihood of a CBI-reform also seems to increase when policymakers face a high probability of getting replaced.

Suggested Citation

  • Daunfeldt, Sven-Olov & Hellström, Jörgen & Landström, Mats, 2008. "Why Do Politicians Implement Central Bank Independence Reforms?," HUI Working Papers 13, HUI Research.
  • Handle: RePEc:hhs:huiwps:0013
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    1. Central Bank Reform
      by Will Luther in the perfect substitute on 2010-03-15 17:07:00

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    1. Berggren, Niclas & Daunfeldt, Sven-Olov & Hellström, Jörgen, 2014. "Social trust and central-bank independence," European Journal of Political Economy, Elsevier, vol. 34(C), pages 425-439.
    2. Daunfeldt, Sve-Olov & Landström, Mats & Rudholm, Niklas, 2013. "Are Central Bank Independence Reforms Necessary for Achieving Low and Stable Inflation?," Umeå Economic Studies 863, Umeå University, Department of Economics.
    3. Fahim Al Marhubi, 2021. "Economic Complexity and Inflation: An Empirical Analysis," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(3), pages 259-271, September.
    4. Berggren, Niclas & Daunfeldt, Sven-Olov & Hellstrã–M, Jã–Rgen, 2016. "Does social trust speed up reforms? The case of central-bank independence," Journal of Institutional Economics, Cambridge University Press, vol. 12(2), pages 395-415, June.
    5. Ana Carolina Garriga, 2016. "Central Bank Independence in the World: A New Data Set," International Interactions, Taylor & Francis Journals, vol. 42(5), pages 849-868, October.
    6. Dumitriu, Ramona & Stefanescu, Răzvan, 2013. "Decizii strategice ale politicii monetare [Strategic decisions of the Monetary Policy]," MPRA Paper 51242, University Library of Munich, Germany, revised 05 Nov 2013.
    7. Michael Berlemann & Kai Hielscher, 2013. "Effective Monetary Policy Conservatism: A Comparison of 13 OECD Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(3), pages 267-290, July.
    8. 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.

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    More about this item

    Keywords

    Central bank independence; political economy;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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