Comparison of Central Bank and Judicial Independence

Abstract

As successful markets are founded on the rule of law and monetary stability, the paper investigates whether judicial independence (JI) and central bank independence (CBI) are positively correlated. After analysing and comparing the meaning, rationale and institutional arrangements for JI and CBI a more nuanced pattern of similarities and differences emerges. Estimation of the statistical significance of the coefficient of correlation between JI and CBI for an international sample shows that there is no significant correlation between indicators of legal independence but a significant correlation between indicators of actual independence.