Measures of central bank autonomy: empirical evidence for OECD, developing, and emerging market economies (original) (raw)
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2004
The International Monetary Fund (IMF) supports central bank autonomy and accountability, since it facilitates price and financial sector stability, which are conducive to sustainable economic growth. In the literature, autonomy is sometimes preferred to the frequently used term independence, as autonomy entails operational freedom, while independence indicates a lack of institutional constraints. A central bank must have clearly defined and prioritized objectives, sufficient authority to achieve these objectives and be autonomous to remain credible. At the same time, it must be accountable for the authority delegated to it to ensure checks and balances. Reforming the legislative framework for a central bank—often after a crisis—can help boost the credibility of monetary policy. This reduces the perceived inflation bias and thus the real interest rate, which advances sustainable economic growth. However, a consistent reform of the legislative framework must be supported by commitment...
The Level of Central Bank Independence in Developed and Developing Countries
2017
This LLM dissertation offers a comparative examination of varying levels of Central Bank Independence in pursuit of monetary policy in developed and developing countries, looking particularly at the situation in developing countries in the Caribbean (Belize, Barbados and Jamaica) as compared to developed countries such as the United Kingdom (UK). The author explains the range of factors that can be taken into consideration to measure the level of CBI. Chapter 1 focus on the functions of a CB with particular emphasis on monetary policy and price stability as the primary objective of a CB as well as financial stability and its regulatory role in the financial system. Chapter 2 gives an overview of CBI, its importance and discusses the different types of CBI and its relation with accountability. Chapter 3 measures the level of CBI in the selected Caribbean jurisdictions using their CB’s Acts. An analysis is done based on the four (4) legal indicators stipulated in the Cukierman, Webb a...
Abstracts 1. New gap (improved index and how they react to inflation), there is changes and update of the index over times Arnone 2006 and J (2008) and changes of the institutions.. in both emerging and developing countreis, Arnone 2006 2. CBI may not necessary ensure lower inflation, Klomp and De haan (2010) but should be a conditions under which search predictions may hold Posen 3. Posen (1993) argues that, the causal relationship between CBI and inflation, is explained by a third factor which he terms financial opposition to inflation. Central banks' decisions do not only reflect their institutional capabilities and legal constraints, but that such determinations also respond to the political environment. Therefore, the central bank can guarantee price stability only as long as the financial sector is ready to support policies associated with reducing inflation: that is, the more developed the financial sector, the more successful will be stabilization policies, throug lwer inters rates, good corporate governance checks on the central bank, reduces the crowding out effect of limited finance 4. Infter math financial crisis central banks around the expended their beyond traditional target of inflation and use of policy rates, sacrificing polical in support of operational independence to archieve pre and post targets, because the letter is not correlated with inflationary pressure in developed countries
Central Bank Independence in the World: A New Dataset
2016
This article introduces the most comprehensive dataset on de jure central bank independence (CBI), including yearly data from 182 countries between 1970 and 2012. The dataset identifies statutory reforms affecting CBI, their direction, and the attributes necessary to build the Cukierman, Webb and Neyapty index. Previous datasets focused on developed countries, and included non-representative samples of developing countries. This dataset's substantially broader coverage has important implications. First, it challenges the conventional wisdom about central bank reforms in the world, revealing CBI increases and restrictions in decades and regions previously considered barely affected by reforms. Second, the inclusion almost 100 countries usually overlooked in previous studies suggests that sample selection may have substantially affected results. Simple analyses show that the associations between CBI and inflation, unemployment or growth are very sensitive to sample selection. Finally, the dataset identifies numerous CBI decreases (restrictions), whereas previous datasets mostly look at CBI increases. These data's coverage not only allows researchers to test competing explanations of the determinants and effects of CBI in a global sample, but it also provides a useful instrument for cross-national studies in diverse fields, such as liberalization, diffusion, political institutions, democratization, or responses to financial crises.
Determinants of Central Bank Independence and Governance: Problems and Policy Implications
2000
Central bank independence and governance (CBIG) is a term subject to conflicting definitions and so its related studies are difficult to compare. This paper therefore focuses on developing of a more useable definition, and an index model identifying the determinants of independence and governance and their possible policy implications. It also examines various independence measurement tools such as ranking and
2004
This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper identifies issues to consider when designing the structure, size, and composition of the governing boards and management of a central bank. While central bank autonomy and accountability are generally accepted as good practice, there is less consensus regarding the structure, size, and composition of the governing bodies. This paper surveys 101 central bank laws covering 113 countries and classifies the governance structure according to degree of autonomy, functions performed, size, composition, appointment procedures, and terms of the members. The paper concludes that an appropriate balance must be struck between the functions of the governing entities, simplicity, and country specific factors. The functions of the various bodies follow logically if a greater appreciation exists for the type of autonomy delegated to the central bank.