Central Bank Independence and Transparency: Evolution and Effectiveness

Christopher Crowe and Ellen Meade

No 2008/119, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the current level of central bank independence (CBI) and transparency in a broad sample of countries using newly constructed measures, and looks at the evolution in both measures from an earlier time period. Increases in CBI have tended to occur in more democratic countries and in countries with high levels of past inflation. More independent central banks in turn tend to be more transparent, while transparency is also positively correlated with measures of national institutional quality. Exploiting the time dimension of our data to eliminate country fixed effects and using instrumental variable estimation to overcome endogeneity concerns, we present evidence that greater CBI is associated with lower inflation. We also find that enhanced transparency practices are associated with the private sector making greater use of information provided by the central bank.

Keywords: WP; central bank independence; monetary policy; transparency; inflation bias; CBI index; regime variable; inflation variability; country sample; independence measure; transparency practice; Central bank autonomy; Inflation; Exchange rate arrangements; Central bank transparency; Exchange rate flexibility; Global (search for similar items in EconPapers)
Pages: 28
Date: 2008-05-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (232)

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Related works:
Journal Article: Central bank independence and transparency: Evolution and effectiveness (2008)
Working Paper: Central Bank Independence and Transparency: Evolution and Effectiveness (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2008/119

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