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Social trust and central-bank independence
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration.
Research Institute of Industrial Economics (IFN).
Dalarna University.
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
Abstract [en]

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.
Keyword [en]
Central banks, Independence, Credibility, Trust, Inflation, Monetary policy, Reform
National Category
Research subject
URN: urn:nbn:se:umu:diva-81744DOI: 10.1016/j.ejpoleco.2013.10.002ISI: 000336018100026OAI: diva2:658264
Available from: 2013-10-21 Created: 2013-10-21 Last updated: 2016-05-26Bibliographically approved

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Hellström, Jörgen
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Business Administration
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