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Measuring central bank independence in India – a legal and behavioural case of Reserve Bank of India

Author

Listed:
  • Aijaz Ahmad Bhat
  • Javaid Iqbal Khan
  • Javed Ahmad Bhat
  • Sajad Ahmad Bhat

Abstract

Purpose - This study attempts to quantify the degree of independence of Central Bank of India from both legal and behavioural contexts over the period 1990–1991 to 2018–2019, a period encompassing major developments in the operation and regulation of Reserve Bank of India (RBI). Design/methodology/approach - We followed Jasmineet al.(2019) to calculate the magnitude of de jure independence of RBI and for de facto independence, “turnover rate (TOR) of CB governor” as proposed by Cukiermanet al.(1992) is applied. Findings - The results report that the legal autonomy of RBI increased specifically after the reforms and post formulation of Monetary Policy Committee (MPC). However, the actual independence of RBI remains more or less in line within the critical threshold limit of 0.2. Practical implications - The study proposes effective implementation of laws and procedures designed to promote the independence of Central Bank of India imperative for an effective monetary operation along with a coordinated fiscal policy. Originality/value - Targeted study of a particular central bank on its “independence” aspect in general and of the Reserve Bank of India in particular has not been attempted as on date. It is to this end that the present study contributes. Peer review - The peer review history for this article is available at:https://publons.com/publon/10.1108/IJSE-02-2023-0098.

Suggested Citation

  • Aijaz Ahmad Bhat & Javaid Iqbal Khan & Javed Ahmad Bhat & Sajad Ahmad Bhat, 2024. "Measuring central bank independence in India – a legal and behavioural case of Reserve Bank of India," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 52(3), pages 406-421, June.
    • Handle: RePEc:eme:ijsepp:ijse-02-2023-0098
    DOI: 10.1108/IJSE-02-2023-0098
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    More about this item

    Keywords

    Central bank independence; Turnover rate; Monetary policy; Reserve Bank of India; Fiscal discipline; E42; E43; E58;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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