Economic and Socio-Political Determinants of de Facto Monetary Institutions and Inflationary Outcomes

Fabrizio Carmignani (), Emilio Colombo and Patrizio Tirelli

The B.E. Journal of Macroeconomics, 2008, vol. 8, issue 1, 29

Abstract: In this paper we estimate a model where inflation, a measure of de facto central bank independence and an index of de facto exchange rate regime are simultaneously determined by a set of economic, political and institutional variables. De facto central bank independence is hampered by socio-political turbulence and benefits from the balance of powers between the executive and the parliament. Inflation is explained by de facto central bank independence, by the level and volatility of public expenditure and by the de facto exchange rate regime. Openness (real and financial) affects inflation through the exchange rate regime channel. Success in controlling inflation, in turn is crucial to sustain central bank independence and exchange rate stability.

Keywords: inflation; central bank independence; exchange (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (6)

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DOI: 10.2202/1935-1690.1591

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