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The political economy of reforms in central bank design: evidence from a new dataset

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  • Davide Romelli

    () (Trinity College Dublin)

Abstract

What accounts for the worldwide changes in central bank design over the past four decades? Using a new dataset on central bank institutional design, this paper investigates the timing, pace and magnitude of reforms in a sample of 154 countries over the period 1972-2017. I construct a new dynamic index of central bank independence and show that initial reforms that increase the level of independence, as well as a regional convergence, represent important drivers of changes in central bank design. Similarly, an external pressure to reform, such as an IMF loan program, also increases the likelihood of reforms, while political factors or crises episodes have little impact. These results are robust to controlling for the direction and size of reforms, alternative indices of central bank independence and estimation strategies.

Suggested Citation

  • Davide Romelli, 2018. "The political economy of reforms in central bank design: evidence from a new dataset," Trinity Economics Papers tep0918, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduee:tep0918
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    File URL: https://www.tcd.ie/Economics/TEP/2018/TEP0918.pdf
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    1. repec:eee:ecolet:v:155:y:2017:i:c:p:59-61 is not listed on IDEAS
    2. repec:ces:ifodic:v:17:y:2019:i:1:p:50000000005876 is not listed on IDEAS
    3. Donato Masciandaro & Paola Profeta & Davide Romelli, 2016. "Gender and Monetary Policymaking: Trends and Drivers," BAFFI CAREFIN Working Papers 1512, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Oana Peia & Romelli Davide, 2019. "Central Bank Reforms and Institutions," Open Access publications 10197/10911, School of Economics, University College Dublin.
    5. Zoe Venter, 2019. "The Role of Central Banks and the Political Environment in Financial Stability: A Literature Review," Working Papers REM 2019/89, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    6. repec:ces:ifodic:v:17:y:2019:i:01:p:30-35 is not listed on IDEAS
    7. Donato Masciandaro & Davide Romelli, 2018. "Beyond the Central Bank Independence Veil: New Evidence," BAFFI CAREFIN Working Papers 1871, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    8. repec:eee:poleco:v:52:y:2018:i:c:p:120-140 is not listed on IDEAS
    9. Donato Masciandaro & Davide Romelli, 2018. "To Be or not to Be a Euro Country? The Behavioural Political Economics of Currency Unions," BAFFI CAREFIN Working Papers 1883, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    10. Charléty, Patricia & Romelli, Davide & Santacreu-Vasut, Estefania, 2017. "Appointments to central bank boards: Does gender matter?," Economics Letters, Elsevier, vol. 155(C), pages 59-61.
    11. Masciandaro, Donato & Romelli, Davide, 2018. "Central bankers as supervisors: Do crises matter?," European Journal of Political Economy, Elsevier, vol. 52(C), pages 120-140.

    More about this item

    Keywords

    central banks; central bank independence; central bank governance; legislative reforms.;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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