Informal Central Bank Independence: An Analysis for Three European Countries

30 Pages Posted: 4 Jun 2008

See all articles by David Cobham

David Cobham

Heriot-Watt University - School of Management and Languages

Stefania Cosci

University Lumsa

Fabrizio Mattesini

University of Rome Tor Vergata - Faculty of Economics

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Abstract

Changes in formal and informal central bank independence (CBI) in France, Italy and the United Kingdom in the period from the mid-1970s to the 1990s are examined; the major changes occurred in the 1990s, after the disinflations of the 1980s. Broad trends in the informal independence of central banks (CBs), defined as the ability to pursue price stability regardless of the government's preferences, are identified on the basis of a monetary policy narrative and an analysis of a set of qualitative determinants of informal independence. The most important determinants are the social/political acceptance that monetary policy is the sphere of the CB, the existence of anti-inflationary commitments in the form of intermediate targets for monetary policy, the degree of social consensus on the means and ends of macroeconomic policy, and the relative technical expertise of the CB. These broad trends help to explain some of the inflation experience of the 1980s and 1990s, which cannot be understood in terms of changes to formal CBI.

Suggested Citation

Cobham, David and Cosci, Stefania and Mattesini, Fabrizio, Informal Central Bank Independence: An Analysis for Three European Countries. Scottish Journal of Political Economy, Vol. 55, No. 3, pp. 251-280, July 2008, Available at SSRN: https://ssrn.com/abstract=1140402 or http://dx.doi.org/10.1111/j.1467-9485.2008.00453.x

David Cobham (Contact Author)

Heriot-Watt University - School of Management and Languages ( email )

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Stefania Cosci

University Lumsa

Via della Traspontina
Roma, Rome 00192
Italy

Fabrizio Mattesini

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

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