EconPapers    
Economics at your fingertips  
 

Monetary Policy Shifts and Central Bank Independence

Irfan Qureshi

No 269096, Economic Research Papers from University of Warwick - Department of Economics

Abstract: Why does low central bank independence generate high macroeconomic instability? A government may periodically appoint a subservient central bank chairman to exploit the inflation-output trade-off, which may generate instability. In a New Keynesian framework, time-varying monetary policy is connected with a “chairman effect.” To identify departures from full independence, I classify chairmen based on tenure (premature exits), and the type of successor (whether the replacement is a government ally). Bayesian estimation using cross-country data confirms the relationship between policy shifts and central bank independence, explaining approximately 25 (15) percent of inflation volatility in developing (advanced) economies. Theoretical analyses reveal a novel propagation mechanism of the policy shock.

Keywords: Financial; Economics (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Date: 2017-09-09
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://ageconsearch.umn.edu/record/269096/files/twerp_1139_qureshi.pdf (application/pdf)
http://ageconsearch.umn.edu/record/269096/files/tw ... i.pdf?subformat=pdfa (application/pdf)

Related works:
Working Paper: Monetary Policy Shifts and Central Bank Independence (2017) Downloads
Working Paper: Monetary Policy Shifts and Central Bank Independence (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269096

Access Statistics for this paper

More papers in Economic Research Papers from University of Warwick - Department of Economics
Bibliographic data for series maintained by AgEcon Search ().

 
Page updated 2019-01-01
Handle: RePEc:ags:uwarer:269096