Why Do Politicians Implement Central Bank Independence Reforms?

Sven-Olov Daunfeldt (), Jörgen Hellström () and Mats Landström ()
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Jörgen Hellström: Department of Economics, Postal: Umeå University, SE-90187 Umeå, Sweden
Mats Landström: Department of Economics, Postal: University of Gävle, SE-801 76 Gävle, Sweden

No 13, HUI Working Papers from The Swedish Retail Institute (HUI)

Abstract: It is something of a puzzle that politicians around the world have chosen to give up power to independent central banks, thereby reducing their possibilities to fine-tune the economy. In this paper the determinants of central bank independence (CBI) reforms are studied using a new data set on the possible event of such reforms in 119 countries. According to the data, as much as 81 countries had implemented CBI-reforms during the study period. The results indicate, moreover, that policymakers are more likely to delegate power to independent central banks when the foreign debt is relatively high. In non-OECD countries, the likelihood of a CBI-reform also seems to increase when policymakers face a high probability of getting replaced.

Keywords: Central bank independence; political economy (search for similar items in EconPapers)
JEL-codes: E42 E58 E61 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cdm, nep-mac, nep-mon and nep-pol
Date: 2008-02-29
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Related works:
Working Paper: Why Do Politicians Implement Central Bank Independence Reforms? (2008)
Working Paper: Why Do Politicians Implement Central Bank Independence Reforms? (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:huiwps:0013

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