Central Bank Independence and Sacrifice Ratios: Some Further Considerations

Ernst Baltensperger and Peter Kugler ()

Open Economies Review, 2000, vol. 11, issue 2, 125 pages

Abstract: The existing literature reports a positive relationship between sacrifice ratios and central bank independence. This paper discusses two critical points related to the usual procedures employed by this literature. One concerns the issue of non-stationarity of the inflation rate, the other the problem of correlation between the error terms for different disinflation episodes in the same country. The way in which the sacrifice ratio-central bank independence relationship is tested is reconsidered taking into account these points. Our results shed considerable doubts on the nature and robustness of such a relationship and on the usual interpretation given to it in the literature. Copyright Kluwer Academic Publishers 2000

Keywords: central bank independence; sacrifice ratio; stationarity of inflation; panel data estimation (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (19)

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DOI: 10.1023/A:1008309303922

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