Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 589: Central Bank Independence and Price Stability: Evidence from 23 OECD-countries

Sven-Olov Daunfeldt () and Xavier de Luna ()
Additional contact information
Sven-Olov Daunfeldt: The Swedish Research Institute of Trade (HUI), Postal: SE 103 29 Stockholm, Sweden
Xavier de Luna: Department of Statistics, Postal: S 901 87 Umeå, Sweden

Abstract: In this paper, we use a non-parametric regression method to compare the transition process from high to low inflation with the implementation dates of central bank independence reforms. In a majority of the countries, price stability is achieved before more independence is given to the central bank. This suggests that the credibility of a low inflation goal can be achieved without institutional reforms which grant the central bank more independence from the political policymakers.

Keywords: Central bank reform; inflation targeting; monetary policy; non-parametric decomposition

JEL-codes: C14; E52; E58

14 pages, First version: September 5, 2002. Revised: June 12, 2003.

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