Is There Any Link between Legal Central Bank Independence and Inflation? Evidence from Latin America and the Caribbean

Jácome, Luis; Vázquez, Francisco

doi:10.2139/ssrn.1112029

Cited by 63 publications

(24 citation statements)

References 29 publications

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“…First, legal CBI indicators are available only for some specific years, while it is not known what happens with the central bank law in place between those years. Most studies using panel estimators (e.g., Kilponen 1999;Franzese 1999;Dolmas et al 2000;Jácome and Vázquez 2008) therefore estimate the relationship between inflation and CBI with a non-time-varying CBI indicator. Instead, we use a rolling average of the TOR over ten preceding years as our CBI indicator.…”

Section: Methodsmentioning

confidence: 99%

Central bank independence and inflation revisited

Klomp

Haan

2010

Public Choice

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We re-examine the relationship between central bank independence (CBI), proxied by the central bank governor's turnover rate and an indicator based on central bank laws in place, and inflation using a random coefficient model with the Hildreth-Houck estimator for more than 100 countries in the period 1980 to 2005. We conclude that there exists no general significant negative relation between our indicators of central bank independence and inflation. Central bank independence has a significant effect only in a minority of the countries in our sample.

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Section: Methodsmentioning

confidence: 99%

Central bank independence and inflation revisited

Klomp

Haan

2010

Public Choice

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“…For these countries, we considered banking crisis dummies. But these alone can lead to an omitted variable bias because the central bank reforms after the crises were usually part of broader structural reforms that included privatizations, trade reform and other structural macro policies (Jacome and Vasquez, 2005). To circumvent this bias, we considered the index of structural reform of the Inter-American Development Bank as an extra control variable (Lora, 2001;Lora and Panizza, 2002).…”

Section: Discussionmentioning

confidence: 99%

“…The central bank (legal) independence index employed is that of Jacome and Vasquez (2005). This index takes into account not only economic and political sovereignty (as in Cukierman, 1992) but also financial sovereignty, responsibility, transparency and the role of the central bank as a lender in the last resort.…”

Section: Datamentioning

confidence: 99%

“…Central bank independence to conduct monetary policy has been related to low inflation rates with no consequences for economic growth (Grilli et al, 1991;Cukierman, 1992;Alesina and Summers, 1993;Eijffinger and Haan, 1996;Jacome, 2001;Jacome and Vasquez, 2005). Heightened independence can also be associated with lesser intervention in the foreign exchange market.…”

Section: Introductionmentioning

confidence: 99%

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Foreign exchange intervention and central bank independence: the Latin American experience

Nunes

Silva

2008

Applied Financial Economics Letters

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“…Because the legal foundations of monetary policies in most economies change relatively rarely, legal indicators possess practically no explanatory power for the economic development within economies. Most of the empirical studies on the relationships between central bank independence and macroeconomic performance are, therefore, cross-sectional (Cukierman (2000), De Haan et al (1996, Maliszewski (2000), Jacome and Vazquez (2005)). Evaluation of central bank laws is done by calculation of numerical index values.…”

Section: A Legal Independencementioning

confidence: 99%

Currency Substitution and Central Bank Independence in the Central and Eastern European Economies

Bouyon¹

2009

JEI

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This paper examines the extent to which the confrontation between the authorities implementing the monetary policy and the private agents asking for foreign currencies can influence the global process of currency substitution. The choice of an appropriate monetary policy depends on an original timeinconsistency problem where a partly-independent and conservative central bank is faced with a type of monetary targeting. The motives of the private agents in asking for foreign currencies are precautionary and/or speculative. We obtain the optimal growth of the aggregate in foreign currencies, which negatively depends on transparency, central bank credibility and inflation instability of the economy linked with the currency, and positively on inflation instability of the domestic economy. Then, we propose different measures of these determinants and we econometrically test this optimum in the economies of Central and Eastern Europe. The results are consistent with empirical literature on the macroeconomic determinants of dollarization. However, in this paper, the complexity of currency substitution is better illustrated and an empirical approach in relation to the institutional determinants of currency substitution is provided.• JEL Classification: C23, E5, F41•

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Is There Any Link between Legal Central Bank Independence and Inflation? Evidence from Latin America and the Caribbean

Cited by 63 publications

References 29 publications

Central bank independence and inflation revisited

Central bank independence and inflation revisited

Foreign exchange intervention and central bank independence: the Latin American experience

Currency Substitution and Central Bank Independence in the Central and Eastern European Economies

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