HUI Working Papers, HUI Research
Why Do Politicians Implement Central Bank Independence Reforms?
(), Jörgen Hellström
() and Mats Landström
Abstract: It is something of a puzzle that politicians around the
world have chosen to give up power to independent central banks, thereby
reducing their possibilities to fine-tune the economy. In this paper the
determinants of central bank independence (CBI) reforms are studied using a
new data set on the possible event of such reforms in 119 countries.
According to the data, as much as 81 countries had implemented CBI-reforms
during the study period. The results indicate, moreover, that policymakers
are more likely to delegate power to independent central banks when the
foreign debt is relatively high. In non-OECD countries, the likelihood of a
CBI-reform also seems to increase when policymakers face a high probability
of getting replaced.
Keywords: Central bank independence; political economy; (follow links to similar papers)
JEL-Codes: E42; E58; E61; P16; (follow links to similar papers)
34 pages, February 29, 2008
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