Central Bank Independence, Disinflations and Monetary Policy

Down Ian
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Down Ian: University of Tennessee, Knoxville

Business and Politics, 2009, vol. 10, issue 3, 1-22

Abstract: Analyses of central bank independence (CBI) have generated two sets of apparently contradictory results - CBI appears to be both inversely related to inflation and positively related to the rise in unemployment and slowdown in economic growth during disinflations. I suggest that these results may issue from autonomous central banks being associated with sharper, more aggressive disinflations. To test the proposition I use two measures of policy stance, one of which contains more information concerning policymaker's expectations than has heretofore been the case. The results suggest a need to qualify yet further the optimality of CBI.

Date: 2009
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DOI: 10.2202/1469-3569.1211

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