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Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s

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  • Andreas Freytag

    (University of Jena, School of Busniess and Economics)

  • Friedrich Schneider

    (Department of Economics, Johannes Kepler University Linz)

Abstract

Central bank independence (CBI) is a very important precondition for price stability. However, the empirical evidence for a correlation between both is relatively weak. In this paper, this weakness is countered with a) an extended measure of monetary commitment, which includes well-known criteria for CBI and external criteria such as convertibility and exchange rate regimes and b) the argument that monetary commitment can grant price stability best if it is backed by an adequate assignment of economic policy. An empirical assessment with data from four decades confirms the crucial role of monetary commitment for price stability.

Suggested Citation

  • Andreas Freytag & Friedrich Schneider, 2007. "Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s," Jena Economics Research Papers 2007-002, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2007-002
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    central bank independence; price stability; monetary commitment;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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