Social Trust and Central-Bank Independence

Niclas Berggren, Sven-Olov Daunfeldt and Jörgen Hellström
Additional contact information
Jörgen Hellström: Umeå School of Business and Economics, Postal: Umeå University

No 920, Working Paper Series from Research Institute of Industrial Economics

Abstract: Central banks have been made more independent in many countries. A common rationale has been the existence of a credibility (or lack-of-trust) problem for monetary policy. This indicates a possible and until now unexplored link between social trust and central-bank independence. Our empirical findings, based on data from 149 countries, confirm that there is such a link, in the form of a u-shaped relationship. We suggest that two factors help explain this finding: the need for this kind of reform and the ability with which it can be implemented. At low trust levels, the need for central-bank independence is strong enough to dominate the low ability; at high trust levels the ability for reform is high and dominates the low need; at intermediate trust levels there is neither need nor ability strong enough to generate very independent central banks.

Keywords: Trust; Credibility; Reforms; Monetary Policy; Inflation; Central Bank; Time Inconsistency (search for similar items in EconPapers)
JEL-codes: E52 E58 P48 Z13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-05-23
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Berggren, Niclas, Sven-Olof Daunfeldt and Jörgen Hellström, 'Social Trust and Central-Bank Independence' in European Journal of Political Economy, 2014, pages 425-439.

Downloads: (external link)
https://www.ifn.se/wfiles/wp/wp920.pdf (application/pdf)

Related works:
Journal Article: Social trust and central-bank independence (2014)
Working Paper: Social trust and central-bank independence (2012)
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:hhs:iuiwop:0920

Access Statistics for this paper

More papers in Working Paper Series from Research Institute of Industrial Economics Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Gustafsson ().