We test some positive implications of the commitment hypothesis for the design of monetary institutions in open economies, by studying the determinants of Central Bank independence on a sample of 55 countries, for the period 1980–1989. We document fairly consistent empirical evidence in support of the hypothesis that strategic commitment is indeed important to understand cross-country variation in the level of Central Bank degree of dependence. We also address the related question why only highly industrialized countries have relied on such a solution to the inflationary bias of monetary policy whereas other countries have not. Data suggest that the answer is related to the presence and the size of world-wide common features in the business cycle at country level. Copyright # 2007 John Wiley & Sons, Ltd. JEL CODE: E58 KEY WORDS: Central Bank independence; open economies

On the Determinants of Central Bank Independence

D'AMATO, Marcello;
2009-01-01

Abstract

We test some positive implications of the commitment hypothesis for the design of monetary institutions in open economies, by studying the determinants of Central Bank independence on a sample of 55 countries, for the period 1980–1989. We document fairly consistent empirical evidence in support of the hypothesis that strategic commitment is indeed important to understand cross-country variation in the level of Central Bank degree of dependence. We also address the related question why only highly industrialized countries have relied on such a solution to the inflationary bias of monetary policy whereas other countries have not. Data suggest that the answer is related to the presence and the size of world-wide common features in the business cycle at country level. Copyright # 2007 John Wiley & Sons, Ltd. JEL CODE: E58 KEY WORDS: Central Bank independence; open economies
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11386/3022457
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