Are Central Bank Independence Reforms Necessary for Achieving Low and Stable Inflation?
(English)Manuscript (preprint) (Other academic)
Using data on the occurence of central bank independence (CBI) reforms in 131 countries during 1980-2005, we test whether they were important in reducing inflation and maintaining price stability. CBI reforms are found to have reduced inflation on average 3.31% when countries with historically high inflation rates are included. But countries with lower inflation have reduced it without institutional reforms granting central banks more independence, undermining the theoretical time-inconsistency case for CBI. There is furthermore no evidence that CBI reforms have helped reduce inflation variability.
Research subject Economics
IdentifiersURN: urn:nbn:se:umu:diva-83982OAI: oai:DiVA.org:umu-83982DiVA: diva2:678358