(In)Dependent Central Banks

73 Pages Posted: 3 Nov 2022 Last revised: 7 Feb 2025

See all articles by Vasso Ioannidou

Vasso Ioannidou

Bayes Business School (formerly Cass); Centre for Economic Policy Research (CEPR)

Sotirios Kokas

University of Essex - Essex Business School

Thomas Lambert

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Alexander Michaelides

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: October 31, 2022

Abstract

Since the 1980s, many countries have reformed their central banks to enhance operational independence. Using biographical data, press coverage, and expert opinions, we find that during this period, appointments of central bank governors became increasingly politically motivated, particularly following legislative reforms intended to insulate central banks and their governors from political interference.  Furthermore, we show that politically motivated appointments are associated with lower de facto independence and worse economic and financial outcomes. As central banks worldwide have gained greater power, our findings contribute to the debate on their democratic accountability and credibility.

Keywords: central banking, central bank independence, governor appointment, legislative reforms, political connections, inflation, financial stability, stock markets

JEL Classification: E58, G00, P16

Suggested Citation

Ioannidou, Vasso and Kokas, Sotirios and Lambert, Thomas and Michaelides, Alexander, (In)Dependent Central Banks (October 31, 2022). Available at SSRN: https://ssrn.com/abstract=4262695 or http://dx.doi.org/10.2139/ssrn.4262695

Vasso Ioannidou

Bayes Business School (formerly Cass) ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Sotirios Kokas

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Thomas Lambert (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.thomaslambert.org

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Alexander Michaelides

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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