Financial Supervision Fragmentation and Central Bank Independence: The Two Sides of the Same Coin?

50 Pages Posted: 5 Nov 2005

See all articles by Andreas Freytag

Andreas Freytag

University of Jena - Department of Economics

Donato Masciandaro

Bocconi University - Department of Economics

Date Written: October 2005

Abstract

This paper analyses how the central bank's role in the monetary institutional setting can affect the unification process of the overall financial supervision architecture. Using indicators of monetary commitment and central bank independence, we claim that these legal proxies show an inverse link with financial supervision unification. Therefore, the trade off still holds between the supervisory and the central bank involvement per se, however, monetary commitment and independence do also matter. In this respect, in an institutional setting characterized by a central bank deeply and successfully involved in supervision, or legally independent, a multi-authority model is likely to occur.

Keywords: Financial Supervision, Single Authority, Central Bank Independence, Monetary Commitment

JEL Classification: E58, G20, G28

Suggested Citation

Freytag, Andreas and Masciandaro, Donato, Financial Supervision Fragmentation and Central Bank Independence: The Two Sides of the Same Coin? (October 2005). University of Lecce Economics Working Paper No. 76/37, Available at SSRN: https://ssrn.com/abstract=837124 or http://dx.doi.org/10.2139/ssrn.837124

Andreas Freytag

University of Jena - Department of Economics ( email )

Carl-Zeiss-Str. 3
07743 Jena
Germany

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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