(In)Dependent Central Banks

63 Pages Posted: 3 Nov 2022 Last revised: 23 Dec 2023

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 the institutional framework governing their central banks to increase operational independence. Collecting systematic biographical information, international press coverage, and independent expert opinions, we find that over the same period appointments of central bank governors have become more politically motivated, especially after significant legislative reforms aiming to insulate central banks and their governors from political interference. We also show that politically-motivated appointments reflect lower de facto independence, and are associated with worse inflation and financial stability outcomes. Given the increase in central banks' powers worldwide, our findings inform the debate about their political accountability and credibility.

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

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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