Any link between legal central bank independence and inflation? evidence from Latin America and the Caribbean by Luis Ignacio JГЎcome

Cover of: Any link between legal central bank independence and inflation? | Luis Ignacio JГЎcome

Published by International Monetary Fund, Monetary and Financial Systems Dept. in Washington, D.C .

Written in English

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Subjects:

  • Banks and banking, Central -- Latin America.,
  • Banks and banking, Central -- Caribbean Area.,
  • Inflation (Finance) -- Latin America.,
  • Inflation (Finance) -- Caribbean Area.

Edition Notes

Book details

Statementprepared by Luis I. Jácome and Francisco Vázquez.
SeriesIMF working paper -- WP/05/75
ContributionsVázquez, Francisco F., International Monetary Fund. Monetary and Financial Systems Dept.
The Physical Object
Pagination41 p. :
Number of Pages41
ID Numbers
Open LibraryOL19514496M

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Any Link Between Legal Central Bank Independence and Inflation. Evidence from Latin America and the Caribbean Prepared by Luis I.

Jácome and Francisco Vázquez1 Authorized for distribution by Alain Ize and S. Kal Wajid April Abstract This Working Paper should not be reported as representing the views of the IMF. Downloadable. This paper reviews central bank legislation in 24 countries in Latin America and the Caribbean during the s.

Using panel regressions, the paper finds a negative relationship between legal central bank independence (CBI) and inflation. This result holds for three alternative measures of CBI, and after controlling for international inflation, banking crises, and.

Downloadable (with restrictions). This paper explores the effects of central bank independence (CBI) on inflation in a sample of 24 Latin American and Caribbean countries during Using panel regressions, the paper finds a negative relationship between CBI and inflation.

This result holds for three alternative measures of legal CBI, as well as for a measure of effective. Legal central bank independence and inflation in Latin America and the Caribbean, is there a link. Latin American and Caribbean countries achieved a remarkable reduction in inflation since the mids, from an average of about 50% in (excluding Argentina: %, and Bolivia: 11,%) to 7% in Cited by: NOTE: Crowe and Meade measure central bank independence on a numerical scale from 0 (no independence) to 1 (complete independence).

For this table, weak CBI is defined to include those banks with a scale from 0 to less than ; moderate independence is defined as those banks from to ; strong independence is for banks with a CBI measure of or above. Abstract. This paper reviews central bank legislation in 24 countries in Latin America and the Caribbean during the s.

Using panel regressions, we find a negative relationship between legal central bank independence (CBI) and by:   This paper reviews central bank legislation in 24 countries in Latin America and the Caribbean during the s. Using panel regressions, we find a negative relationship between legal central bank independence (CBI) and inflation.

This result holds for three alternative measures of CBI and after controlling for international inflation, banking crises, and exchange Cited by: This IMF Working Paper published on 21 April reviews central bank legislation in 24 countries in Latin America and the Caribbean during the s.

Using panel regressions, the authors find a negative relationship between legal central bank independence (CBI) and inflation.

Get this from a library. Any link between legal central bank independence and inflation?: evidence from Latin America and the Caribbean. [Luis Ignacio Jácome; Francisco F Vázquez; International Monetary Fund. Monetary and Financial Systems Department,] -- This paper reviews central bank legislation in 24 countries in Latin America and the Caribbean during the s.

Central bank credibility and the ability to deliver low inflation have been linked to central bank independence. That link can be illuminated by examining the Fed's independence. The Federal Reserve System derives its power from, and ulti­ mately is responsible to, Congress.

Therefore, it is not independent ofgovernment. Nor should it. L.I. Jácome, F. VázquezIs there any link between legal central bank independence and inflation.

Evidence from Latin America and the Caribbean Evidence from Latin America and the Caribbean Eur. Pol. Econ., 24 (4) (), pp. Cited by: 5. THE INDEPENDENCE OF CENTRAL BANKS AND INFLATION: AN EMPIRICAL ANALYSIS ABSTRACT This paper analyzes the relationship between central bank independence and inflation in a panel of countries for.

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 countries in the period to We conclude that there exists no general significant Cited by: An independent central bank can control inflation (a central bank perceives high inflation to inhibit growth).

Therefore, the link between CBI, inflation, and economic growth is examined in this article. It is argued that Central Bank Independence is linked to lower inflation, and lower inflation is linked to higher growth. 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.

Over the past 30 years, most central banks across the advanced economies have been given the ability to conduct monetary policy independently from interference by fiscal and political authorities. The latest Centre for Macroeconomics and CEPR expert survey invited views on whether this era of central bank independence is drawing to a close, particularly in Europe.

The independence of central banks has again become a prominent subject in academia, politics and the media. However, this time, in contrast to the past, critical voices dominate. This column, taken from a recent VoxEU eBook, asks how this turnaround in opinion can be explained, and whether the independence of central banks will survive.

a generic term referring to unusual forms or volumes of central bank lending and to unusual types of open-market operations. bubble is an increase in the price of an asset or assets that goes far beyond what can be justified by improving fundamentals, such as dividends and earnings for shares of stock or incomes and interest rate for houses.

And in economies such as West Germany, where inflation-targeting has apparently been successful, there might not have been any causal link between central bank independence and low inflation even Author: Tadit Kundu. am EDT Recap: Central Bank independence under fire am EDT Chart: On inflation targeting am EDT IMF softens its lines on Greek banks.

Central bank independence does not involve any trade-off. Instead, it appears to offer countries a free lunch: it has the benefit of lower inflation without any visible cost. This finding has led some countries such as New Zealand to give their central banks greater independence.

India can take a leaf from the book of New Zealand and go for the. Jacome, L. and F. Vazquez (). ‘Any Link between Legal Central Bank Independence and Inflation. Evidence from Latin America and the Caribbean’. IMF Working Papers, WP/05/75 (Washington D.C.: International Monetary Fund). Google ScholarAuthor: Jane Bogoev, Goran Petrevski.

An independent central bank should be free to set its policy instrument with the aim of achieving its objective. Functional independence thus requires that the primary objective of the national central bank of an EU member state be set in a clear and legally certain way and be fully in line with the primary objective of price stability established by the Treaty.

For a real-world example of how a system of market-chosen monetary policy would work in the absence of a central bank, one need not look to the past, writes David Saied.

An example exists in present-day Central America, in the Republic of Panama, a country that has lived without a central bank since its independence, with a very successful and stable macroeconomic. Using 59 studies, we perform a meta-regression analysis of studies examining the relationship between inflation and central bank independence (CBI).

The studies considered are very different with respect to the CBI indicator used, the sample of countries and time periods covered, model specification, estimators used and publication by: Central Bank Independence and the Real Economy Although most of the empirical work focused on the relationship between central bank in-dependence and the rate of inflation, some studies examined the link between indepcn-dence and economic output.

if an independent central bank can produce lower inflation than a dependent central bank, does this. In this paper we examine the relationship between inflation and central bank independence. A number of studies have demonstrated that the more independent a central bank is the more likely its inflation outcome will be low.

Using data for 20 countries over the periodthis paper attempts to investigate whether central bankCited by: 1. After inflation ran amok in the s and s, many central bankers fought for, and won, more freedom to control interest rates and set Author: Christopher Condon.

Jacome, L., and F. Vazquez (). Is there any link between legal central bank independence and inflation. Evidence from Latin America and the Caribbean. European Journal of Political Econ pp.

Brum, J.H. The Effect of Central Bank Independence in Developing Countries, Economics Letters, vol. 90, pp. Author: Abdou Aziz Toure. First, there is a distinction between the terms monetary policy independence and central bank independence.

In the literature that developed before the global financial crisis, central bank independence referred to independence from political influences in the setting of monetary policy.

But many central banks have roles outside monetary policy. inflation rate and the degree of central bank independence are negatively correlated, this relationship does not reflect any causal link running from central bank independence to low inflation.

They claimed that in countries where economic agents strongly object to inflation, there is a strong will to keep inflation down. between inflation and central bank independence.

Given the well-documented cor-relation between the level and variability of inflation, it is not surprising that Figure lb reveals a strong negative relationship between inflation variability and central bank independence.

Figures 2a and 2b investigate the relationship between central bank. Central Bank Independence: What Does It Mean. Talk by the Governor, B.W. Fraser, to the 20th SEANZA Central Banking Course, Karachi, 23 November The issue of central bank independence has generated considerable debate all over the world in recent years.

We are all familiar with the much publicised reforms to the Reserve Bank of New Size: 74KB. Central bank independence and inflation targeting must be the problem.

Create more money, run larger deficits, target unemployment and real GDP growth, dress it up by targeting nominal GDP, raise inflation expectations, and depreciate the currency. The call is the same in all the major countries. With central bank independence and inflation. Measuring Central Bank Independence in Twenty- Five countries: A New Index of Institutional Quality Jiji T Mathew Abstract Nowadays, it is widely believed that a high degree of Central Bank Independence (CBI) coupled with some explicit mandate for the Central Bank (CB) to restrain inflation is an important institutional device to assure price.

An effective way of achieving low inflation is to establish an independent central bank. De Gregorio reviews the theory and evidence on inflation and growth and provides additional empirical evidence for a large cross-section of countries.

The evidence, he reports, suggests a robust negative relationship between inflation and growth. negative inflation correlation for central bank independence seems to have satisfied curiosity on this point.4 Yet, this coexistence, while necessary to establish a causal link between central bank independence and low inflation, is insufficient to do so.

If independent central banks' policies are inherently more credible, not only infla. Central Bank: A central bank or monetary authority is a monopolized and often nationalized institution given privileged control over the production and distribution of money and credit.

In modern Author: Troy Segal. Central bank independence In the analysis of central bank independence we focus on the European Central bank which is considered to be the best functional central bank around the world.

A speech by (Smaghi, ) posted on the ECB website talks specifically about the central bank independence and explains the different forms of independence. Risks of central bank independence Some critics of an independent central bank argue that although the average inflation rate and the degree of central bank independence are negatively correlated, this relationship does not reflect any causal link running from central bank independence to low inflation.

They argue that countries whereFile Size: 48KB. The IMF Working Paper "Inflation Performance and Constitutional Central Bank Independence: Evidence From Latin America and the Caribbean" explores the relationship between the constitutional entrenchment of central bank independence and inflation perform.The relationship between inflation rates and central bank independence from political control has been the subject of a number of recent studies.

Generally these studies provide evidence that greater central bank (CB) independence is associated with lower inflation rates (Banaian et al. [,]; Burdekin and Willett [Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence THEDEGREE OF CENTRAL BANK INDEPENDENCE varies con- siderably across countries.

Several authors including Bade and Parkin (), Ale- sina (, ), and Grilli, Masciandaro, and Tabellini () found that moreFile Size: KB.

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