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(In)dependent Central Banks

Author

Listed:
  • Ioannidou, Vasso
  • Kokas, Sotirios
  • Lambert, Thomas
  • Michaelides, Alexander

Abstract

Since the 1980s many countries have reformed the institutional framework governing their central banks to increase operational independence. Collecting systematic biographical information, international press coverage, and independent expert opinions, we find that over the same period appointments of central bank governors have become more politically motivated, especially after significant legislative reforms aiming to insulate central banks and their governors from political interference. We also show that politically-motivated appointments reflect lower de facto independence, and are associated with worse inflation and financial stability outcomes. Given the increase in central banks' powers worldwide, our findings inform the debate about their political accountability and credibility.

Suggested Citation

  • Ioannidou, Vasso & Kokas, Sotirios & Lambert, Thomas & Michaelides, Alexander, 2023. "(In)dependent Central Banks," CEPR Discussion Papers 17802, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17802
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    More about this item

    Keywords

    Central banking; Central bank independence; Governor appointment; Legislative reform; Political connection; Inflation; Financial stability;
    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
    • G00 - Financial Economics - - General - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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