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Independence of Central Banks in Commodity Economies

Author

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  • Viktor Koziuk

    (Ternopil National Economic University)

Abstract

This article introduces the hypothesis that resource-rich countries display a low degree of central bank independence (CBI). This hypothesis is proven based on multivariable regression, but the influence of resource factors is not considered strong enough compared with previous inflationary experience and the characteristics of the political regime. It stresses that the impact of the commodity wealth factor on CBI choice is direct (through the share of commodity exports in total export) and indirect through the lower level of democracy in commodities countries that feature more dependent central banks. Also, this hypothesis is proven based on the grouping of countries. Such grouping shows that despite a general tendency of CBI increase in the world, a group of commodity exporting countries experiencing a substantially lower level of mean GMT-index, ECWN-index, and transparency-index resulted in lower CBI compared with groups of emerging markets and developing countries. Explaining these phenomena is rooted in features of institutional distortions in commodity economies, the specific structure of interventionist policy to overcome a "resource curse", and the specific role of the exchange rate and FX reserves in intertemporal macroeconomic policy.

Suggested Citation

  • Viktor Koziuk, 2016. "Independence of Central Banks in Commodity Economies," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 235, pages 6-25.
    • Handle: RePEc:ukb:journl:y:2016:i:235:p:6-25
    DOI: 10.26531/vnbu2016.235.006
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    References listed on IDEAS

    as
    1. Crowe, Christopher & Meade, Ellen E., 2008. "Central bank independence and transparency: Evolution and effectiveness," European Journal of Political Economy, Elsevier, vol. 24(4), pages 763-777, December.
    2. Dreher, Axel & Sturm, Jan-Egbert & de Haan, Jakob, 2008. "Does high inflation cause central bankers to lose their job? Evidence based on a new data set," European Journal of Political Economy, Elsevier, vol. 24(4), pages 778-787, December.
    3. Mr. Bernard J Laurens & Mr. Marco Arnone & Jean-François Segalotto, 2006. "The Measurement of Central Bank Autonomy: Survey of Models, Indicators, and Empirical Evidence," IMF Working Papers 2006/227, International Monetary Fund.
    4. repec:zbw:bofitp:2012_006 is not listed on IDEAS
    5. Siklos, Pierre L., 2008. "No single definition of central bank independence is right for all countries," European Journal of Political Economy, Elsevier, vol. 24(4), pages 802-816, December.
    6. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Central bank independence; indexes of central bank independence; resource curse; commodities export; exchange reserves; exchange rates; quality of institutions;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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