Does Social Trust Speed Up Reforms? The Case of Central-Bank Independence

Journal of Institutional Economics (2016), 12(2): 395-415

IFN Working Paper No. 1053

25 Pages Posted: 10 Jan 2015 Last revised: 29 Apr 2016

See all articles by Niclas Berggren

Niclas Berggren

Research Institute of Industrial Economics (IFN); University of Economics, Prague - Faculty of Economics and Public Administration

Sven-Olov Daunfeldt

University of Umea - Department of Economics

Jörgen Hellström

Umeå University - Umeå School of Business and Economics

Date Written: January 8, 2015

Abstract

Many countries have undertaken central-bank independence reforms, but the years of implementation differ. What explains such differences in timing? This is of interest more broadly, as it sheds light on factors that matter for the speed at which economic reforms come about. We study a rich set of potential determinants, both economic and political, but put special focus on a cultural factor, social trust. We find empirical support for an inverse u-shape: Countries with low and high social trust implemented their reforms earlier than countries with intermediate levels. We make use of two factors to explain this pattern: the need to undertake reform (which is more urgent in countries with low social trust) and the ability to undertake reform (which is greater in countries with high social trust).

Keywords: Central banks, Independence, Social trust, Inflation, Monetary policy, Reform

JEL Classification: E52, E58, P48, Z13

Suggested Citation

Berggren, Niclas and Daunfeldt, Sven-Olov and Hellström, Jörgen, Does Social Trust Speed Up Reforms? The Case of Central-Bank Independence (January 8, 2015). Journal of Institutional Economics (2016), 12(2): 395-415; IFN Working Paper No. 1053. Available at SSRN: https://ssrn.com/abstract=2546809 or http://dx.doi.org/10.2139/ssrn.2546809

Niclas Berggren (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/nb

University of Economics, Prague - Faculty of Economics and Public Administration ( email )

nám. W. Churchilla 4
Praha, 130 67
Czech Republic

Sven-Olov Daunfeldt

University of Umea - Department of Economics ( email )

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

Jörgen Hellström

Umeå University - Umeå School of Business and Economics ( email )

Umea, 90187
Sweden
+46-90-7866987 (Phone)

HOME PAGE: http://www.usbe.umu.se/english/about/staff/?languageId=1&uid=johe0001

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