Two Essays on Central Bank Independence Reforms

Mats Landström ()
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Mats Landström: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden

No 792, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This thesis consists of two empirically oriented papers on Central Bank Independence (CBI) Reforms. Paper [1] is an investigation of why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to control the economy. A new data-set covering 132 countries, of which 89 had implemented CBI reforms during 1980-2005, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country had been characterized by high variability in inflation and if they faced a high probability of being replaced. No such effects were found for OECD countries. Paper [2], using a difference-in-difference approach, studies whether CBI reform matters for inflation performance. The analysis is based on a dataset including the possible occurence of CBI reforms in 132 countries during the period 1980-2005. CBI reform is found to have contributed to bringing down inflation in high-inflation countries, but it seems unrelated to inflation performance in low-inflation countries.

Keywords: Monetary policy; institutional reform; central banking; price stability; political economy; delegation; institutional economics; inflation; time-inconsistency; accountability (search for similar items in EconPapers)
JEL-codes: E52 E58 P48 (search for similar items in EconPapers)
Pages: 82 pages
Date: 2009-11-27
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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