This article introduces the most comprehensive dataset on de jure central bank independence (CBI), including yearly data from 182 countries between 1970 and 2012. The dataset identifies statutory reforms affecting CBI, their direction, and the attributes necessary to build the Cukierman, Webb and Neyapty index. Previous datasets focused on developed countries, and included non-representative samples of developing countries. This dataset’s substantially broader coverage has important implications. First, it challenges the conventional wisdom about central bank reforms in the world, revealing CBI increases and restrictions in decades and regions previously considered barely affected by reforms. Second, the inclusion of almost 100 countries usually overlooked in previous studies suggests that the sample selection may have substantially affected results. Simple analyses show that the associations between CBI and inflation, unemployment or growth are very sensitive to sample selection. Finally, the dataset identifies numerous CBI decreases (restrictions), whereas previous datasets mostly look at CBI increases. These data’s coverage not only allows researchers to test competing explanations of the determinants and effects of CBI in a global sample, but it also provides a useful instrument for cross-national studies in diverse fields, such as liberalization, diffusion, political institutions, democratization, or responses to financial crises.

Theories of central bank independence have more exact implications regarding inflation in different political-economic environments than generally understood or empirically examined. They imply that inflation in any given country-time will be a weighted average of what it would be if the central bank completely controlled monetary policy and what it would be if the government completely controlled it, with the degree of central bank independence weighting the former. An equation embodying this theoretical expectation is estimated by constrained least-squares from a time-series c ross-section of inflation rates in developed democracies since the Bretton Woods era. The results confirm that the anti-inflationary benefit of central bank independence is not constant but rather depends on every variable in the broader political-economic environment to which wholly autonomous central banks and governments would respond differently. Conversely, the inflationary impacts of all such political-economic variables depend on the degree of central bank independence.

Abstract of associated article: Increasing the independence of a central bank from political influence, although ex-ante socially beneficial and initially successful in reducing inflation, would ultimately fail to lower inflation permanently. The smaller anticipated policy distortions implemented by a more independent central bank would induce the fiscal authority to decrease current distortions by increasing the deficit. Over time, inflation would increase to accommodate a higher public debt. By contrast, imposing a strict inflation target would lower inflation permanently and insulate the primary deficit from political distortions.

A large literature establishes the benefits of central bank independence, yet very few have shown directly negative economic consequences. I argue that, rather than improving economic outcomes, independent central banks are myopically focused on inflation and this leads to tepid responsiveness to banking instability. I show that banking crises produce larger unemployment shocks, and credit and stock market contractions when the level of central bank independence is high. Further, I show that these significant economic costs can be mitigated by abandoning the inflation-centric policy mandates predominantly considered necessary. When the bank has high technical and political independence, banks’ whose policy mandate does not rigidly prioritize inflation produce significantly better outcomes during banking crises. At the same time, I show that this configuration does not produce higher inflation, suggesting it achieves a more flexible design without incurring significant costs.

This dataset is about books. It has 1 row and is filtered where the book is The declaration of independence : can a central bank credibly commit itself to low inflation?. It features 7 columns including author, publication date, language, and book publisher.

I estimate various backward-looking and forward-looking Taylor rules augmented with variables that indicate proximity to an election and whether the Fed Chair and the majority of a chamber of Congress share the same political party affiliation to investigate whether Congress has influenced Federal Reserve policy from 1961 to 2020. I find that the Fed is susceptible to pressures from the Senate. In line with previous work, left-leaning politicians exhibit a higher tolerance for inflation. This results in the federal funds rate being lower by about 2.35 points when the Democratic party has a Senate majority. Second, while I find some evidence that the House and the Fed Chair sharing partisan affiliation results in tighter policy, this result is not robust to alternative measures of inflation. Finally, I find persuasive evidence that Congressional pressures on the Fed do not create a political monetary cycle around elections.

Central Banks are the central public monetary institution of a country or region, tasked with managing the currency and monetary policy of the state, as well as overseeing the financial system of the area under its supervision. In most of the largest economies of the world, gathered together formally as the Group of 20 (G20), the central bank is an independent institution with legally mandated goals which it must abide by. This means that central banks should, in theory at least, be independent of political control and pursue their mandated goals without being influenced by political concerns, such as pursuing wage growth in order to win votes for the incumbent government. Central banks have mostly been made legally independent since the 1980s, in an effort to allow central bank technocrats to take measures to control inflation, without needing popular political support. With the failures of many central bankers to foresee or prevent the 2008 Global Financial Crisis, however, central banks have come under increasing pressure to incorporate wider concerns into their mandates, with some questioning whether a central bank can ever be truly 'independent'. The goals of central banking For the majority of these central banks, price stability is the goal of their mandates. Price stability is the goal of maintaining price increases to a manageable level which is conducive of stable economic activity. This usually manifests itself as a goal of keeping inflation to around two percent per year. Since the 2008 Global Financial Crisis, there has been a widening of some of these central banks' mandates to include financial stability. This action was often taken in reaction to the perception that many central banks became complacent about the growth of the financial sector during the period known as 'the Great Moderation' (1980s-2007), which led to the bank failures and subsequent bailouts of the crisis. Some experts have recently called for central banks to include climate change related goals in their mandates, with an aim to promote 'green central banking' and the growth of a sustainable finance industry. As of 2020 no central bank of the G20 countries has adopted such a goal in their mandates.

Plans for European Monetary Union are based on the conventional postulate that increasing the independence of the central bank can reduce inflation without any real economic effects. However, the theoretical and empirical bases for this claim rest on models of the economy that make unrealistic information assumptions and omit institutional variables other than the central bank. When the signaling problems between the central bank and other actors in the political economy are considered, we find that the character of wage bargaining conditions the impact of central bank independence by rendering the signals between the bank and the bargainers more or less effective. Greater independence can reduce inflation without major employment effects where bargaining is coordinated, but it brings higher levels of unemployment where bargaining is uncoordinated. Thus, currency unions like the EMU may require higher levels of unemployment to control inflation than their proponents envisage; they will have costs as well as benefits that will be distributed unevenly among and within the member nations based on the changes they induce in the status of the bank and of wage coordination.

Data on central bank independence, central bank reforms (from Garriga 2016, updated), turnover of central bank governors (Dreher, Sturm, and de Haan 2008). Users of the data should cite the original sources of data (Dreher, Sturm, and de Haan 2008 and/or Garriga 2016), and Bodea and Garriga 2022. BBodea, Cristina and Ana Carolina Garriga. 2022. "Central bank independence in Latin America: Politicization and de-delegation." Governance. doi:10.1111/gove.12706 Dreher, Axel, Jan-Egbert Sturm, and Jakob de Haan. 2008. “Does High Inflation Cause Central Bankers to Lose Their Job? Evidence Based on A New Data Set.” European Journal of Political Economy 24(4): 778–787. Garriga, Ana Carolina. 2016. “Central Bank Independence in the World: A New Data Set.” International Interactions 42(5): 849–868.

At the end of 2024, Zimbabwe had the highest inflation rate in the world, at 736.11 percent change compared to the previous year. Inflation in industrialized and in emerging countries Higher inflation rates are more present in less developed economies, as they often lack a sufficient central banking system, which in turn results in the manipulation of currency to achieve short term economic goals. Thus, interest rates increase while the general economic situation remains constant. In more developed economies and in the prime emerging markets, the inflation rate does not fluctuate as sporadically. Additionally, the majority of countries that maintained the lowest inflation rate compared to previous years are primarily oil producers or small island independent states. These countries experienced deflation, which occurs when the inflation rate falls below zero; this may happen for a variety of factors, such as a shift in supply or demand of goods and services, or an outflow of capital.

Abstract This paper analyzes a signaling model of monetary policy when inflation targets are not set by the monetary authority. The most important implication of the model’s solution is that a higher ex-ante dispersion in central bankers’ preferences, referred to as heterogeneity in policy orientation, increases the signaling cost of commitment to inflation targets. The model allows for a comparison of two distinct institutional arrangements regarding the tenure in office of the central banker and the head of government. We find that staggered terms yield superior equilibria when opportunistic political business cycles can arise from presidential elections. This is a consequence of a reduction of information asymmetry about monetary policy, and gives theoretic support to the observed practice of staggered terms among independent central banks.

This paper adopts and develops the “fear of floating” theory to explain the decision to implement a de facto peg, the choice of anchor currency among multiple key currencies, and the role of central bank independence for these choices. We argue that since exchange rate depreciations are passed-through into higher prices of imported goods, avoiding the import of inflation provides an important motive to de facto peg the exchange rate in import-dependent countries. This study shows that the choice of anchor currency is determined by the degree of dependence of the potentially pegging country on imports from the key currency country and on imports from the key currency area, consisting of all countries which have already pegged to this key currency. The fear of floating approach also predicts that countries with more independent central banks are more likely to de facto peg their exchange rate since independent central banks are more averse to inflation than governments and can de facto peg a country's exchange rate independently of the government.

Analyses of monetary policy posit that exchange-rate pegs, inflation targets, and central bank independence can help anchor private-sector inflation expectations. Yet there are few direct tests of this argument. We offer cross-national, micro-level evidence on the effectiveness of monetary anchors in controlling private-sector inflation concerns. Using firm-level data from 81 countries (~10,000 firms), we find evidence that “international” anchors (exchange-rate commitments) correlate significantly with a substantial reduction in private-sector concerns about inflation while “domestic” anchors (inflation targeting and central bank independence) do not. Our conjecture is that private-sector inflation expectations are more responsive to exchange-rate anchors because they are more transparent, more constraining, and more costly than domestic anchoring arrangements.

Central bank independence (CBI) and fixed exchange rates are alternative monetary commitments that differ in transparency. While CBI is opaque and difficult to monitor, a commitment to a fixed exchange rate is easily observed. Political systems also vary in terms of transparency. I argue that the transparency of monetary commitments and the transparency of political systems are substitutes. Where political decision making is opaque (autocracies), governments must look to a commitment that is more transparent and constrained (fixed exchange rates) than the government itself. The transparency of the monetary commitment substitutes for the transparency of the political system to engender low inflation. Where the political process is transparent (democracies), a formal commitment to CBI can produce lower inflation because private agents and the political opposition are free to detect and punish government interference with the central bank. Statistical results indicate that (1) autocracies are more likely to adopt exchange-rate pegs than democracies, and (2) CBI is effective in limiting inflation in nations with high levels of political transparency.

Data on central bank independence (de jure and the facto) and fixed exchange rate regimes (de jure and de facto), plus control variables used to replicate findings presented in the paper. Data coverage: worldwide, 1970 to 2020. Variable description in the paper.

Turkey saw phenomenal growth in the 2000s as economic reforms ushered in FDI, GVCs expanded, and productivity increased. The early 2000s saw Turkey exit from major economic crisis with a strengthened fiscal framework, a strengthened, inflation-targeting mandate for the Central Bank, the establishment of an independent bank regulator, and importantly, a recently agreed Customs Union agreement with the EU. From 2001 to 2017, incomes per capita in Turkey doubled in real terms and tripled in current dollar terms. Turkey transformed from a lower-middle-income country (LMIC) at the start of the 2000s to very nearly reaching high-income status by 2014. This drove a rapid fall in poverty from above 30 percent to just 9 percent1. Very few other countries matched Turkey’s growth over this period, and almost all of them were new EU member states.