2016
DOI: 10.26531/vnbu2016.235.006
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Independence of Central Banks in Commodity Economies

Abstract: This article introduces the hypothesis that resource-rich countries display a low degree of central bank independence (CBI). This hypothesis is proven based on multivariable regression, but the influence of resource factors is not considered JEL Codes: E58, E59, O23, Q33Keywords: central bank independence, indexes of central bank independence, "resource curse", commodities export, exchange reserves, exchange rates, quality of institutions А. IntroductionThe instability of price trends for commodities increasin… Show more

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Cited by 14 publications
(7 citation statements)
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References 28 publications
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“…The 39-country democracy group returns better results than the 28-country autocracy group. At the same time, compared to the autocracies, the group of countries with democratic regimes demonstrates the following pattern: they have smaller resource wealth, but prefer more flexible exchange rates, more independent central banks and have higher levels of financial development and more diversified economies (which fully matches the results of prior research (Koziuk, 2016a;Koziuk, 2016b). This outcome may be unambiguously interpreted as supporting the idea that a lower level of resource wealth decreases the likelihood of rent access monopolization, which in turn is generally a certain stimulus for the development of institutions that guarantee economic diversification and provide a boost to the financial system.…”
Section: Empirical Measures Of the Link Between Price Stability And Tsupporting
confidence: 77%
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“…The 39-country democracy group returns better results than the 28-country autocracy group. At the same time, compared to the autocracies, the group of countries with democratic regimes demonstrates the following pattern: they have smaller resource wealth, but prefer more flexible exchange rates, more independent central banks and have higher levels of financial development and more diversified economies (which fully matches the results of prior research (Koziuk, 2016a;Koziuk, 2016b). This outcome may be unambiguously interpreted as supporting the idea that a lower level of resource wealth decreases the likelihood of rent access monopolization, which in turn is generally a certain stimulus for the development of institutions that guarantee economic diversification and provide a boost to the financial system.…”
Section: Empirical Measures Of the Link Between Price Stability And Tsupporting
confidence: 77%
“…This problem pertains to all countries with average and low incomes, but commodity-rich countries constitute a special case. In those countries, financial development can continuously remain depressed for institutional reasons (competition for rent capture, the insufficient protection of property rights, volatile and high inflation) and because the resource extraction sector can operate without the financial depth of the national financial system, thanks to a strong capacity to borrow from abroad in foreign currency (Kurronen, 2012;Koziuk, 2016a). That is to say, counter-cyclical response options under the price stability policy may be limited by the financial development factor.…”
Section: Price Stability and Resource Wealth: A Literature Overviewmentioning
confidence: 99%
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“…An open economy, dependent on international trade and foreign capital, requires an independent central bank. Viktor Koziuk (Koziuk, 2016) notes that one of the world's tendencies is the strengthening of an independent central bank, which is determined by one of the drivers of the formation of macroeconomic stability in the country. Independent central bank can help to avoid inflation, attract foreign capital and investments.…”
Section: Introductionmentioning
confidence: 99%
“…This conclusion should be considered as more institutional. The key role of political independence in the area of financial stability indirectly correlates with conclusions of the second generation research of the relation between monetary autonomy and inflation where the main emphasis is laid on quality of institutions and democracy level as drivers of public choice in favor of more independent central banks (review of the problem is offered in researches by Bodea and Hicks (2012), Dincer and Eichengreen (2014), and Koziuk (2016).…”
Section: Underlying View On the Problemmentioning
confidence: 99%