Beyond the Central Bank Independence Veil: New Evidence

43 Pages Posted: 21 Feb 2018

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics

Davide Romelli

Trinity College (Dublin) - Department of Economics; Trinity College (Dublin)

Date Written: February 2018

Abstract

This paper employs a new and comprehensive database of central bank institutional design to reassess the role of the independence of these public administrations in influencing the macroeconomic performance of countries, before and after the Global Financial Crisis. Using new dynamic indices, the empirical investigation takes into account the evolution of the level of independence in 65 countries over the period 1972-2014. Going beyond the standard correlation between central bank independence and inflation, we confirm the importance of the independence of these public administrations. Importantly we show that the degree of central bank independence is an endogenous variable and stress the relevance of economic and political drivers in shaping the incentives of governments to maintain or reform the governance of these public administrations.

Keywords: Central Bank Independence, Global Financial Crisis, Macroeconomic Performance, Monetary Policy, Populism, Political Economy, Public Administration

Suggested Citation

Masciandaro, Donato and Romelli, Davide, Beyond the Central Bank Independence Veil: New Evidence (February 2018). BAFFI CAREFIN Centre Research Paper No. 2018-71, Available at SSRN: https://ssrn.com/abstract=3126179 or http://dx.doi.org/10.2139/ssrn.3126179

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Davide Romelli

Trinity College (Dublin) - Department of Economics ( email )

Arts Building
Room 3014
Dublin
Ireland

Trinity College (Dublin) ( email )

2-3 College Green
Dublin, Leinster D2
Ireland

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