IDEAS home Printed from https://ideas.repec.org/p/mod/recent/129.html
   My bibliography  Save this paper

Central Bank Independence, financial instability and politics: new evidence for OECD and non-OECD countries

Author

Listed:
  • Barbara Pistoresi

    ()

  • Maddalena Cavicchioli

    ()

  • Giulio Brevini

    ()

Abstract

This paper analyses the determinants of a new index of central bank independence, recently provided by Dincer and Eichengreen (2014), using a large database of economic, political and institutional variables. Our sample includes data for 31 OECD and 49 non-OECD economies and covers the period 1998-2010. To this aim, we implement factorial and regression analysis to synthesize information and overcome limitations such as omitted variables, multicollinearity and overfitting. The results confirm the role of the IMF loans program to guide all the economies in their choice of more independent central banks. Financial instability, recession and low inflation work in the opposite direction with governments relying extensively on central bank money to finance public expenditure and central banks’ political and operational autonomy is inevitably undermined. Finally, only for non-OECD economies, the degree of central bank independence responds to various measures of strength of political institutions and party political instability.

Suggested Citation

  • Barbara Pistoresi & Maddalena Cavicchioli & Giulio Brevini, 2017. "Central Bank Independence, financial instability and politics: new evidence for OECD and non-OECD countries," Center for Economic Research (RECent) 129, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    • Handle: RePEc:mod:recent:129
    as

    Download full text from publisher

    File URL: http://155.185.68.2/campusone/web_dep/Recentpaper/recent-wp129.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Cukierman, Alex, 2008. "Central bank independence and monetary policymaking institutions -- Past, present and future," European Journal of Political Economy, Elsevier, vol. 24(4), pages 722-736, December.
    2. N. Nergiz Dincer & Barry Eichengreen, 2014. "Central Bank Transparency and Independence: Updates and New Measures," International Journal of Central Banking, International Journal of Central Banking, vol. 10(1), pages 189-259, March.
    3. B. Pistoresi & F. Salsano & D. Ferrari, 2011. "Political institutions and central bank independence revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 18(7), pages 679-682.
    4. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, March.
    5. Alesina, Alberto & Stella, Andrea, 2010. "The Politics of Monetary Policy," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 18, pages 1001-1054 Elsevier.
    6. Marcello D'Amato & Barbara Pistoresi & Francesco Salsano, 2009. "On the determinants of Central Bank independence in open economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 107-119.
    7. Farvaque, Etienne, 2002. "Political determinants of central bank independence," Economics Letters, Elsevier, vol. 77(1), pages 131-135, September.
    8. Davide Ferrari & Barbara Pistoresi & Francesco Salsano, 2009. "Political institutions and central bank independence revisited," Department of Economics 0616, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    9. Cukierman, Alex, 2013. "Monetary policy and institutions before, during, and after the global financial crisis," Journal of Financial Stability, Elsevier, vol. 9(3), pages 373-384.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    central bank independence; economic; political and institutional determinants; multicollinearity; factor model; linear regression;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mod:recent:129. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/demodit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.