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Why Do Politicians Implement Central Bank Independence Reforms?

Listed author(s):
  • Daunfeldt, Sven-Olov

    ()

    (The Ratio Institute)

  • Hellström, Jörgen

    (Department of Economics, Umeå University)

  • Landström, Mats

    (Department of Economics, University of Gävle)

This paper is a first empirical attempt to investigate why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to fine-tune the economy. A new data-set covering 132 countries, of which 89 countries had implemented such reforms, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country has been characterized by a high variability in historical inflation and if they faced a high probability of being replaced. No such effects were found for OECD-countries.

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Paper provided by The Ratio Institute in its series Ratio Working Papers with number 143.

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Length: 43 pages
Date of creation: 07 Oct 2009
Handle: RePEc:hhs:ratioi:0143
Contact details of provider: Postal:
The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Phone: 08-441 59 00
Fax: 08-441 59 29
Web page: http://www.ratio.se/
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  12. Daunfeldt, Sven-Olov & de Luna, Xavier, 2002. "Central Bank Independence and Price Stability: Evidence from 23 OECD-countries," Umeå Economic Studies 589, Umeå University, Department of Economics, revised 12 Jun 2003.
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