Inside and Outside of the Central Banks: Independence and Accountability in Financial Supervision -Trends and Determinants

37 Pages Posted: 23 May 2008

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics

Marc Quintyn

International Monetary Fund (IMF)

Michael Taylor

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department

Date Written: May 2008

Abstract

This paper analyzes recent trends in, and determinants of, financial supervisory governance inside and outside central banks. We first identify similarities and differences between this emerging strand in the literature and the central bank independence literature in order to frame the econometric work on the determinants of independence and accountability. We then calculate the levels of supervisory independence and accountability in 55 countries, disentangling similarities and differences among central banks and pure financial supervisors. Finally the empirical analysis indicates that the quality of public sector governance plays a decisive role in establishing accountability arrangements, more than independence arrangements. It also shows that decisions regarding levels of independence and accountability are not well-connected. The results also show that the likelihood for establishing governance arrangements suitable for supervision are higher when the supervisor is located outside the central bank.

Keywords: financial supervision, central banking, independence, accountability, political economy

JEL Classification: G18, G28, E58

Suggested Citation

Masciandaro, Donato and Quintyn, Marc and Taylor, Michael William, Inside and Outside of the Central Banks: Independence and Accountability in Financial Supervision -Trends and Determinants (May 2008). Paolo Baffi Centre Research Paper No. 2008-15, Available at SSRN: https://ssrn.com/abstract=1136146 or http://dx.doi.org/10.2139/ssrn.1136146

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Marc Quintyn

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Michael William Taylor

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6388 (Phone)

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