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Central Bank Independence and Transparency: Evolution and Effectiveness

Author/Editor: Crowe, Christopher W. | Meade, Ellen E.
Authorized for Distribution: May 1, 2008
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper examines the current level of central bank independence (CBI) and transparency in a broad sample of countries using newly constructed measures, and looks at the evolution in both measures from an earlier time period. Increases in CBI have tended to occur in more democratic countries and in countries with high levels of past inflation. More independent central banks in turn tend to be more transparent, while transparency is also positively correlated with measures of national institutional quality. Exploiting the time dimension of our data to eliminate country fixed effects and using instrumental variable estimation to overcome endogeneity concerns, we present evidence that greater CBI is associated with lower inflation. We also find that enhanced transparency practices are associated with the private sector making greater use of information provided by the central bank.
 
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Series: Working Paper No. 08/119
Subject(s): Central banks | Central bank autonomy | Transparency | Monetary policy
Author's keyword(s): Central bank independence | transparency | monetary policy
 
English  
    Published:   May 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008119   Pages:   28
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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