Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 66: Social trust and central-bank independence

Niclas Berggren , Sven-Olov Daunfeldt () and Jörgen Hellström
Additional contact information
Niclas Berggren: Research Institute of Industrial Economics (IFN), Postal: and Department of Institutional Economics, University of Economics in Prague
Sven-Olov Daunfeldt: HUI Research, Postal: The Swedish Research Institute of Trade (HUI), Regeringsgatan 60, 103 29 Stockholm, Sweden, and Department of Economics, Dalarna University
Jörgen Hellström: Umea School of Business and Economics, Postal: Umea University

Abstract: Central banks have been made more independent in many countries. A common rationale has been the existence of a credibility (or lack-of-trust) problem for monetary policy. This indicates a possible and until now unexplored link between social trust and central-bank independence. Our empirical findings, based on data from 149 countries, confirm that there is such a link, in the form of a u-shaped relationship. We suggest that two factors help explain this finding: the need for this kind of reform and the ability with which it can be implemented. At low trust levels, the need for central-bank independence is strong enough to dominate the low ability; at high trust levels the ability for reform is high and dominates the low need; at intermediate trust levels there is neither need nor ability strong enough to generate very independent central banks.

Keywords: Social trust; central-bank independence

JEL-codes: E52; E58; P48; Z13

23 pages, May 22, 2012

Full text files PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Helena Nilsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-02-05 20:50:23.