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Central Bank Independence, Disinflations and Monetary Policy

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  • Down Ian

    (University of Tennessee, Knoxville)

Abstract

Analyses of central bank independence (CBI) have generated two sets of apparently contradictory results - CBI appears to be both inversely related to inflation and positively related to the rise in unemployment and slowdown in economic growth during disinflations. I suggest that these results may issue from autonomous central banks being associated with sharper, more aggressive disinflations. To test the proposition I use two measures of policy stance, one of which contains more information concerning policymaker's expectations than has heretofore been the case. The results suggest a need to qualify yet further the optimality of CBI.

Suggested Citation

  • Down Ian, 2009. "Central Bank Independence, Disinflations and Monetary Policy," Business and Politics, De Gruyter, vol. 10(3), pages 1-22, January.
    • Handle: RePEc:bpj:buspol:v:10:y:2009:i:3:n:1
    DOI: 10.2202/1469-3569.1211
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    2. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.

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