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Socio-political and economic determinants of de facto monetary institutions and inflationary outcomes

Fabrizio Carmignani (), Emilio Colombo () and Patrizio Tirelli ()

No 107, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: In this paper we estimate a model where in°ation, a measure of de facto central bank independence and an index of de facto exchange rate regime are simultaneously determined by a set of economic, political and institutional variables. De facto central bank independence is hampered by socio-political turbulence and bene¯ts from the balance of powers between the executive and the parliament. In°ation is explained by de facto central bank independence, by the level and volatility of public expenditure and by the de facto exchange rate regime. Openness (real and ¯nancial) a®ects in°ation through the ex- change rate regime channel. Success in controlling in°ation, in turn is crucial to sustain central bank independence and exchange rate stability.

Keywords: Infation; central bank independence; exchange rate regime; system estimation (search for similar items in EconPapers)
JEL-codes: E52 E58 C31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2007, Revised 2007
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:107

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