A New Measure of Central Bank Independence

Tobias Adrian, Ashraf Khan and Lev Menand

No 2024/035, IMF Working Papers from International Monetary Fund

Abstract: This paper constructs a new index for measuring de jure central bank independence, the first entirely new index in three decades. The index draws on a comprehensive dataset from the IMF’s Central Bank Legislation Database (CBLD) and Monetary Operations and Instruments Database (MOID) and weightings derived from a survey of 87 respondents, mostly consisting of central bank governors and general counsels. It improves upon existing indices including the Cukierman, Webb, and Neyapti (CWN) index, which has been the de facto standard for measuring central bank independence since 1992, as well as recent extensions by Garriga (2016) and Romelli (2022). For example, it includes areas absent from the CWN index, such as board composition, financial independence, and budgetary independence. It treats dimensions such as the status of the chief executive as composite metrics to prevent overstating the independence of statutory schemes. It distills ten key metrics, simplifying current frameworks that now include upwards of forty distinct variables. And it replaces the subjective weighting systems relied on in the existing literature with an empirically grounded alternative. This paper presents the key features of the new index; a companion, forthcoming paper will provide detailed findings by country/region, income level, and exchange rate regime.

Keywords: Central bank independence; monetary policy; governance; transparency; C. IMF Central Bank Legislation Database; CBLD data coverage; CBLD search category; CEO independent; audit authorities; Central bank autonomy; Central bank legislation; Central bank mandate; Exchange rate arrangements; Price stabilization; Middle East and Central Asia (search for similar items in EconPapers)
Pages: 26
Date: 2024-02-23
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
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