Central Bank Independence and Price Stability: Evidence from OECD-Countries

Posted: 2 Jul 2008

See all articles by Sven-Olov Daunfeldt

Sven-Olov Daunfeldt

University of Umea - Department of Economics

Xavier de Luna

University of Umea - Department of Economics

Date Written: July 2008

Abstract

In this paper, we use a non-parametric regression method to compare the transition process from high to low inflation with the implementation dates of central bank independence reforms. In most countries, price stability is achieved before more independence is given to the central bank. Moreover, for those countries which have implemented a central bank independence reform under a high inflation regime, no evidence is found that the reforms have actually led to price stability. This suggests that the credibility of a low inflation goal can be achieved without institutional reforms which grant the central bank more independence from the political policymakers.

JEL Classification: C14, E52, E58

Suggested Citation

Daunfeldt, Sven-Olov and de Luna, Xavier, Central Bank Independence and Price Stability: Evidence from OECD-Countries (July 2008). Oxford Economic Papers, Vol. 60, Issue 3, pp. 410-422, 2008, Available at SSRN: https://ssrn.com/abstract=1154403 or http://dx.doi.org/gpn004

Sven-Olov Daunfeldt (Contact Author)

University of Umea - Department of Economics ( email )

Umeå University
Umea, SE - 90187
Sweden
+46-90-786 99 92 (Phone)
+46-90-772 302 (Fax)

Xavier De Luna

University of Umea - Department of Economics ( email )

Umeå University
Umea, SE - 90187
Sweden

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