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Bank Independence (bank + independence)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	73%
Humanities and Social Sciences	17%

Kinds of Bank Independence

central bank independence

Selected Abstracts

INDEPENDENCE DAY FOR THE ,OLD LADY': A NATURAL EXPERIMENT ON THE IMPLICATIONS OF CENTRAL BANK INDEPENDENCE,

THE MANCHESTER SCHOOL, Issue 3 2007
JAGJIT S. CHADHA
Central bank independence is widely thought be a sine qua non of a credible commitment to price stability. The surprise decision by the UK government to grant operational independence to the Bank of England in 1997 affords us a natural experiment with which to gauge the impact on the yield curve from the adoption of central bank independence. We document the extent to which the decision to grant independence was ,news' and illustrate that the reduction in medium- and long-term nominal interest rates was some 50 basis points, which we show to be consistent with a sharp increase in policy-maker's aversion to inflation deviations from target. We therefore suggest that central bank independence represents one of the clearest signals available to elected politicians about their preferences on the control of inflation. [source]

Central Bank Independence in the EU: From Theory to Practice

EUROPEAN LAW JOURNAL, Issue 4 2008
Dr Lorenzo Bini Smaghi
Four aspects of central bank independence are discussed separately: functional, institutional, personal and financial. The possible issues raised by central bank involvement in prudential supervision are touched upon. The main conclusion of the article is that a set of legal provisions is generally not sufficient to ensure proper central bank independence; a culture of respect for independence, including its limits, among all parties involved is essential. [source]

Central Bank Independence: An Update of Theory and Evidence

JOURNAL OF ECONOMIC SURVEYS, Issue 1 2001
Helge Berger
This paper reviews recent research on central bank independence (CBI). After we have distinguished between independence and conservativeness, research in which the inflationary bias is endogenised is reviewed. Finally, the various challenges that have been raised against previous empirical findings on CBI are discussed. We conclude that the negative relationship between CBI and inflation is quite robust. [source]

The Impact of Central Bank Independence on Political Monetary Cycles in Advanced and Developing Nations

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 7 2009
SAMI ALPANDA
political monetary cycles; central bank independence This paper examines the extent to which monetary policy is manipulated for political purposes during elections. We do not detect political monetary cycles in advanced countries or developing nations with independent central banks. We do find evidence, however, in developing countries that lack central bank independence. Furthermore, we find some evidence that these cycles are not caused by monetization of election-related fiscal expansions. This suggests that pressure by politicians on the central bank to exploit the Phillips curve may be an important factor in generating political monetary cycles. [source]

Political Business Cycles and Central Bank Independence*

THE ECONOMIC JOURNAL, Issue 486 2003
John Maloney
This paper develops a dynamic model of Rational Partisan Business Cycles in which wage contracts overlap elections and wage setters have to make a prediction about the election result. Empirical analysis of 20 OECD countries supports the theoretical implication that left wing incumbents increase output, but increased expectation of a left wing regime reduces it. The model is extended to incorporate the effects of alternative measures of Central Bank Independence (CBI). The measure of objective independence outperforms the other measures and it is found that CBI reduces politically induced business cycles. [source]

The Political Economy of Inflation, Labour Market Distortions and Central Bank Independence*

THE ECONOMIC JOURNAL, Issue 484 2003
Berthold Herrendorf
Using the citizen-candidate model we study the government's choice of institutions for the labour market and the central bank and derive the implications for inflation and employment. We derive conditions for the existence of equilibria in which the labour market is distorted and the central bank is dependent or independent under a range of conditions affecting central bank dependence, the post-election cycle in inflation and employment and inflation bias. Our results imply that average inflation and inflation variability are lower under an independent central bank whereas employment variability can be lower or higher, consistent with evidence for OECD countries. [source]

THE EFFECTS OF FISCAL AND MONETARY DISCIPLINE ON BUDGETARY OUTCOMES

CONTEMPORARY ECONOMIC POLICY, Issue 2 2007
BILIN NEYAPTI
This article extends the model of Von Hagen and Harden that analyzed the impact of fiscal discipline on budgetary outcomes. We modify the model by adding monetary discipline to interact with fiscal discipline in order to analyze the effects of both on budgetary outcomes. The model predicts that while both inflation and budget deficits are negatively associated with fiscal discipline, they may be positively associated with monetary discipline, proxied by central bank independence. This result obtains due to optimizing agents internalizing the burden of spending: inflation. Although not conclusive due to data limitations, empirical findings also support these predictions. (JEL D73, E58, H61, H72) [source]

Macroeconomics and Politics Revisited: Do central banks Matter?

ECONOMICS & POLITICS, Issue 1 2000
M. Lossani
This paper provides a model encompassing both partisan influences on monetary policy and the issue of central bank independence. In a regime of partial independence, central bank's policy responses are not immune from partisan influences. Still, the latter fail to affect systematically the expected output level in election years. The predictions of the model are consistent with the empirical literature on partisan cycles and account for some of its controversial findings. [source]

Policy decisiveness and responses to speculative attacks in developed countries

EUROPEAN JOURNAL OF POLITICAL RESEARCH, Issue 6 2009
KYUNG JOON HAN
Why are some countries able to defend their currencies when there are speculative attacks, while others fail to do so and devalue their currencies? This article suggests that intragovernment factors as well as government-legislature relations should be considered because many of the policy responses to speculative attacks do not require legislative acquiescence, so that intragovernment attributes will have more substantial effects on the policy responses than those of government-legislature relations. This article suggests that cleavages within government and its instability have a negative effect on decisiveness. Data regarding speculative attacks in developed countries from the 1970s to the 1990s and the Heckman selection model show that governments with many veto players and with less durability have had difficulty in defending their currencies in the face of speculative attacks. The article also finds that governmental institutional effects can be constrained by central bank independence. The effects become substantially smaller and statistically insignificant when central banks are very independent. The overall results imply that policy indecisiveness induced by some political factors makes governments less able to adopt a new policy equilibrium that is necessary to respond to an exogenous shock such as speculative attack. [source]

Economic performance of ,weak' governments and their interaction with central banks and labour: Deficits, economic growth, unemployment and inflation, 1961,1998

EUROPEAN JOURNAL OF POLITICAL RESEARCH, Issue 6 2005
TAKAYUKI SAKAMOTO
Comparative political economists have conventionally claimed that the strength and stability of governments affect policy making and performance, and that what they call ,weak governments', multiparty, minority and short-lived governments , show poorer economic performance. This article tests this and related hypotheses on deficits, economic growth, unemployment and inflation by examining data from 17 OECD countries. I find that there is generally little evidence to indicate that so-called ,weak governments', when considered independently, produce poorer performance than strong ones. However, the effects of different government types are partly contingent on central bank independence and labour organization. When central banks are independent, coalition governments exhibit better inflation and economic growth performance than one-party governments, but the opposite happens when central banks are dependent. I attempt an explanation for these relationships. I also find that independent central banks, under certain conditions, lead to lower growth and higher inflation. Thus, some of the benefits of central bank independence are context-specific, depending on other political-economic factors. [source]

Central Bank Independence in the EU: From Theory to Practice

The Success of Currency Reforms to End Great Inflations: An Empirical Analysis of 34 High Inflations

GERMAN ECONOMIC REVIEW, Issue 2 2009
Peter Bernholz
Great inflations; currency reforms; central bank independence; fixed exchange rate Abstract. The estimation of an ordered probit model for currency reforms attempting to end 31 hyperinflations and three huge inflations of the twentieth century shows that the introduction of an independent central bank and the adoption of a credibly fixed exchange rate are crucial for the success of a currency reform. In addition, currency reforms are demonstrated to be more difficult in centrally planned economies than in market economies. [source]

Civil Servants, Economic Ideas, and Economic Policies: Lessons from Italy

GOVERNANCE, Issue 4 2005
LUCIA QUAGLIA
Building on theoretically oriented and empirically grounded research on two key macroeconomic institutions in Italy, this article explains how and why civil servants can engineer major policy changes, making a difference in a country's trajectory. Italy provides a challenging testing ground for this kind of analysis, as it is generally portrayed as a highly politicized system in which political parties and politicians fully control public policies. Three general lessons can be learned, the first being that the role of civil servants in changing modes of economic governance depends on the resources that they master in the system in which they operate. "Intangible assets" are of primary importance in complex and perceived technical policies, such as monetary and exchange rate policy, which have high potential for "technocratic capture." Second, in these policies, certain intangible assets, such as specific bodies of economic knowledge or policy paradigms, have a considerable impact on policy making. Third, besides interactions in international fora, the professional training of civil servants is a mainstream way through which economic policy beliefs circulate and gain currency, laying the foundations for policy shifts. By highlighting the importance of the intangible assets of macroeconomic institutions, this research makes an unorthodox contribution to the primarily economic literature on central bank independence. [source]

Designing Macroeconomic Frameworks: A Positive Analysis of Monetary and Fiscal Delegation,

INTERNATIONAL FINANCE, Issue 1 2005
Francesca Castellani
This paper proposes a simple model illustrating the potential benefits of approaching the design of a macroeconomic framework conducive to low inflation in both its monetary and fiscal dimensions rather than relying exclusively on the merits of central bank independence and other monetary commitment devices such as currency boards or dollarization. The reason is that monetary delegation alone merely ,relocates' the time-inconsistency problem stemming from the government's incentive to address structural output shortfall with a macroeconomic stimulus. This paper also provides a new argument explaining why fiscal deficit rules may be less effective than instrument-specific rules. [source]

Central Bank Independence: An Update of Theory and Evidence

Political Macroeconomics: A Survey of Recent Developments

JOURNAL OF ECONOMIC SURVEYS, Issue 5 2000
Manfred Gärtner
The paper surveys political macroeconomics, covering its development from Rogoff's conservative central banker to the most recent discussions of monetary policy and institutional design. Topics include the inflation-stabilization trade-off, central bank independence with escape clauses and overruling with costs, inflation targets, performance contracts for monetary authorities, and the consequences of output persistence for these issues. Further topics are the political business cycle when output is persistent, the political macroeconomics of fiscal policy, the government spending bias, and the game-theoretic interaction between fiscal and monetary policy. All work is discussed within a coherent analytical framework. [source]

Dependent and Accountable: Evidence from the Modern Theory of Central Banking

JOURNAL OF ECONOMIC SURVEYS, Issue 5 2000
Gustavo Piga
In this paper we take another look at the literature on central bank independence. We show that the representative-agent approach to monetary policy is seriously flawed and does not provide a sound basis for deriving institutional solutions to the inflationary-bias. We then argue that the political approach to monetary policy provides a better account of the inflationary-bias and that this has important implications for the set-up of institutional arrangements, like central-bank independence, and the role of contractual arrangements, like indexation. Central bank independence, if appropriately modeled, can fail to reduce inflationary pressures in plausible circumstances. We then identify some issues in the theory of central banking that have not been clearly resolved and we offer some intuition as to the way they could be studied. We conclude by showing some potentially worrisome implications for the future of the European Monetary Union. [source]

The Impact of Central Bank Independence on Political Monetary Cycles in Advanced and Developing Nations

Has oil lost the capacity to shock?

OXONOMICS, Issue 1 2006
David Walton
Recent high oil prices have neither triggered a recession nor caused inflation. This is in contrast to the ,stagflation' of the 1970s. The dissimilarity can be explained by increased labour market flexibility, central bank independence and the role of monetary policy. [source]

The Limits of Rational Choice: New Institutionalism in the Test Bed of Central Banking Politics in Australia

POLITICAL STUDIES, Issue 3 2002
Stephen Bell
This paper tests the explanatory capacities of different versions of new institutionalism by examining the Australian case of a general transition in central banking practice and monetary politics: namely, the increased emphasis on low inflation and central bank independence. Standard versions of rational choice institutionalism largely dominate the literature on the politics of central banking, but this approach (here termed RC1) fails to account for Australian empirics. RC1 has a tendency to establish actor preferences exogenously to the analysis; actors'motives are also assumed a priori; actor's preferences are depicted in relatively static, ahistorical terms. And there is the tendency, even a methodological requirement, to assume relatively simple motives and preference sets among actors, in part because of the game theoretic nature of RC1 reasoning. It is possible to build a more accurate rational choice model by re-specifying and essentially updating the context, incentives and choice sets that have driven rational choice in this case. Enter RC2. However, this move subtly introduces methodological shifts and new theoretical challenges. By contrast, historical institutionalism uses an inductive methodology. Compared with deduction, it is arguably better able to deal with complexity and nuance. It also utilises a dynamic, historical approach, and specifies (dynamically) endogenous preference formation by interpretive actors. Historical institutionalism is also able to more easily incorporate a wider set of key explanatory variables and incorporate wider social aggregates. Hence, it is argued that historical institutionalism is the preferred explanatory theory and methodology in this case. [source]

An Independent Central Bank and an Independent Monetary Policy: The Role of the Government Budget,The Case of Poland 1924,26

PUBLIC BUDGETING AND FINANCE, Issue 1 2001
Gail E. Makinen
Poland's 1924 stabilization plan created, as measured by contemporary criteria, an independent central bank. The stabilization's success was undermined by a fiscal disequilibrium when a capital levy failed to raise revenue. The Polish government covered the revenue shortfall by exploiting the right of the state to issue subsidiary coins. Although central bank independence was not compromised, Poland did not have an independent monetary policy. When the fiscal disequilibrium was corrected in 1926, the central bank gained complete control over monetary policy. Thus, a balanced budget may be more important to achieving price stability than arrangements to foster central bank independence. [source]