Measuring Central Bank Independence: Ordering, Ranking, or Scoring?

King Banaian

No 2008-3 Classification-E58, Working Papers from Saint Cloud State University, Department of Economics

Abstract: After reviewing the measurement of central bank independence since the original measurement of Bade and Parkin and of Banaian, Laney and Willett, I reconsider the use of a scoring system for central banks as practiced by most modern papers. I conclude that these measures introduce errors that may generate bias in statistical estimations of relationships of central bank autonomy with inflation or growth. I propose a return to a classification system using a typology of central banks and show how central banks have evolved from less independent to more independent types. This paper is forthcoming in Banaian and Roberts, The Design and Use of Political Economy Indicators, Palgrave-Macmillan, 2008.

Keywords: central bank independence; autonomy; inflation; measurement (search for similar items in EconPapers)
Date: 2007-09-10, Revised 2008-02-28
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