Political monetary cycles and a de facto ranking of central bank independence

Sami Alpanda () and Adam Honig

Journal of International Money and Finance, 2010, vol. 29, issue 6, 1003-1023

Abstract: Political monetary cycles are less likely to occur in countries with independent central banks. Independent central banks can withstand political pressure to stimulate the economy before elections or finance election-related increases in government spending. Based on this logic and supporting evidence, we construct a de facto ranking of central bank independence derived from the extent to which monetary policy varies with the electoral cycle. The ranking avoids well-known problems with existing measures of central bank independence and provides independent information about average inflation and inflation volatility differences across countries.

Keywords: Political; monetary; cycles; Central; bank; independence (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:29:y:2010:i:6:p:1003-1023

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