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Beyond the Central Bank Independence Veil: New Evidence

Donato Masciandaro () and Davide Romelli ()

No 1871, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: This paper employs a new and comprehensive database of central bank institutional design to reassess the role of the independence of these public administrations in influencing the macroeconomic performance of countries, before and after the Global Financial Crisis. Using new dynamic indices, the empirical investigation takes into account the evolution of the level of independence in 65 countries over the period 1972-2014. Going beyond the standard correlation between central bank independence and inflation, we confirm the importance of the independence of these public administrations. Importantly we show that the degree of central bank independence is an endogenous variable and stress the relevance of economic and political drivers in shaping the incentives of governments to maintain or reform the governance of these public administrations.

Keywords: Central Bank Independence; Global Financial Crisis; Macroeconomic Performance; Monetary Policy; Populism; Political Economy; Public Administration (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2018
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