Social trust and central-bank independence
2014 (English)In: European Journal of Political Economy, ISSN 0176-2680, E-ISSN 1873-5703, Vol. 34, 425-439 p.Article in journal (Refereed) Published
Central banks have become more independent in many countries. A common rationale has been the existence of a credibility (or lack-of-trust) problem for monetary policy. This indicates a possible and until now unexplored link between social trust and central-bank independence. Our empirical findings, based on data from 149 countries, confirm such a link, in the form of a u-shaped relationship. We suggest that two factors help explain this finding: the need for this kind of reform and the ability with which it can be implemented. At low trust, the need for central-bank independence is strong enough to dominate the low ability; at high trust the ability for reform is high and dominates the low need; at intermediate trust levels there is neither need nor ability strong enough to generate very independent central banks.
Place, publisher, year, edition, pages
Elsevier, 2014. Vol. 34, 425-439 p.
Central banks, Independence, Credibility, Trust, Inflation, Monetary policy, Reform
Research subject Economics
IdentifiersURN: urn:nbn:se:umu:diva-81744DOI: 10.1016/j.ejpoleco.2013.10.002ISI: 000336018100026OAI: oai:DiVA.org:umu-81744DiVA: diva2:658264