A New Measure of Central Bank Independence
IMF Working Papers, February 23, 2024
Source details
- Canonical URL
- A New Measure of Central Bank Independence
Other formats
Bibliographic details
- Authors: Tobias Adrian, Ashraf Khan, Lev Menand
- Published: February 23, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400268410.001
Index construction and purpose
- Constructs a new index for measuring de jure central bank independence, described as the first entirely new index in three decades.
- Distills ten key metrics to measure central bank independence, simplifying frameworks that previously included upwards of forty distinct variables.
- Treats dimensions such as the status of the chief executive as composite metrics to prevent overstating the independence of statutory schemes.
Data sources and weighting
- Draws on a comprehensive dataset from the IMF’s Central Bank Legislation Database (CBLD) and Monetary Operations and Instruments Database (MOID).
- Weightings are derived from a survey of 87 respondents, mostly consisting of central bank governors and general counsels.
- Replaces the subjective weighting systems relied on in the existing literature with an empirically grounded alternative.
Improvements over existing indices
- Improves upon the Cukierman, Webb, and Neyapti (CWN) index (the de facto standard since 1992) and recent extensions by Garriga (2016) and Romelli (2022).
- Includes areas absent from the CWN index, such as:
- board composition,
- financial independence,
- budgetary independence.
Key features and contributions
- Simplifies measurement by focusing on ten distilled metrics while preserving technical accuracy of legal and institutional features.
- Introduces composite treatment for certain dimensions to avoid overstatement of independence under statutory schemes.
- Provides an empirically grounded weighting scheme based on expert survey responses.
Presentation and further work
- This paper presents the key features of the new index.
- A companion, forthcoming paper will provide detailed findings by country/region, income level, and exchange rate regime.
Content in this bundle
- Working Paper