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CENTRAL BANK TRANSPARENCY AND INDEPENDENCE UNDER THE INFLATION TARGETING REGIME

Irina – Raluca Badea
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Irina – Raluca Badea: University of Craiova Faculty of Economics and Business Administration

Annals of University of Craiova - Economic Sciences Series, 2017, vol. 1, issue 45, 117-129

Abstract: The transparency and independency of central banks have been the subject of overheated debates mostly after the Maastricht Treaty was undertaken, namely after the year 1992. Therefore, numerous studies dating from the 1990s focus on measuring central bank independency(CBI), proxied usually by the turnover rate and demonstrating that there is an inverse correlation between CBI and inflation. To put it differently, a central bank which is isolated from political pressure is able to conduct a more efficient monetary policy, and its accountability goes towards the fundamental objective, namely price stability. This paper aims at presenting transparency and independency in the context of inflation targeting, drawing the attention to the dimensions of the CBI and limitations when it is quantified. Moreover, the emphasis is put on the two standard indices, GMT and CUK, and their economic interpretation. Even though the legal measure of independency consists of political and economic autonomy, we should take into consideration the informal independency as well.

Keywords: critical; central bank; independence; transparency; inflation targeting (search for similar items in EconPapers)
JEL-codes: E58 E52 E31 (search for similar items in EconPapers)
Date: 2017
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