Central Bank Independence, Accountability, and Transparency A Global Perspective

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  • Format: Hardcover
  • Copyright: 2009-07-15
  • Publisher: Palgrave Macmillan
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This book explores three key areas of central banking and governance -- autonomy, accountability and transparency -- and looks at links between the areas, as well as assessing the impact of central bank autonomy on macroeconomic performance. The issues are approached from theoretical and empirical perspectives.

Author Biography

BERNARD LAURENS is at the International Monetary Fund.
MARCO ARNONE is at the Catholic University and CeMaFir, Milan.

Table of Contents

List of Figuresp. x
List of Tablesp. xi
Notes on the Contributorsp. xiii
Forewordp. xv
Prefacep. xvii
Acknowledgementsp. xix
Introductionp. 1
Survey of Models and Indicators of Independencep. 6
Introductionp. 6
Base indicators of independencep. 7
First indicators of de jure independence: Bade and Parkin (1977)p. 8
Alesina's political response (1988, 1989)p. 10
Grilli, Masciandaro, and Tabellini (1991)p. 12
Two of the most widely used indicators: Cukierman (1992)p. 16
Aggregation of two legal measures: Alesina and Summers (1993)p. 18
A new legal indicator: Eijffinger and Schaling (1993)p. 20
Political vulnerability of central banks: Cukierman and Webb (1995)p. 20
Subsequent literature and empirical studies on base indicatorsp. 25
Theoretical and empirical clarifications on central bank independencep. 25
Endogenizing the inflation biasp. 29
Robustness of independence measuresp. 32
Causality of hypotheses on central bank independencep. 35
Robustness and sensitivity of results, and search for new measuresp. 41
Independence, credibility, and costs of deflationp. 51
Conclusionsp. 59
Appendices:p. 63
Variables in Cukierman's LVAU-LVAW indicesp. 63
Variables in Cukierman's QVAU-QVAWp. 67
Summary of base indicators of de jure independencep. 69
Summary of base indicators of de facto independencep. 77
Summary of empirical studies of de jure independencep. 81
Summary of empirical studies on de fact independencep. 88
Survey of Models and Indicators on Accountabilityp. 90
Responsibility and accountabilityp. 90
Responsibilityp. 91
Accountabilityp. 91
The concept of accountability in the literaturep. 93
Briault, Haldane, and King (1996): de jure and de facto accountabilityp. 93
Bini-Smaghi and Gros (2000): ex ante and ex post accountabilityp. 94
de Haan, Amtenbrink, and Eijffinger (1998): three main featuresp. 95
Castellani (2002)p. 97
Siklos (2002)p. 97
Time inconsistency and accountabilityp. 98
Delegating monetary policy to an independent central bankp. 98
Overridep. 98
Contractual solutionp. 99
Indicators and measures of accountabilityp. 99
Briault, Haldane, and King (1996)p. 99
de Haan, Amtenbrink, and Eijffinger (1998)p. 100
Bini-Smaghi and Gros (2000 and 2001)p. 102
Stasavage (2003)p. 104
Siklos (2002)p. 104
Accountability indices: comparison of empirical resultsp. 105
Survey of Models and Indicators of Transparencyp. 107
Introductionp. 107
Rationales for transparencyp. 108
Boost central bank credibilityp. 108
Influence expectationsp. 108
Protect central bank independencep. 109
Strengthen the understanding of monetary policyp. 109
Reduce information asymmetries and uncertainity in financial marketsp. 110
Enhance market efficiencyp. 111
Eliminate government uncertainty on the performance of monetary policyp. 111
Enhance fiscal and monetary policy coordinationp. 111
The concept of transparency in the literaturep. 111
Transparency and accountabilityp. 111
Characteristics of transparencyp. 112
Aspects of transparency in the policy-making processp. 114
Indicators and measures in the literaturep. 116
General observationsp. 116
Siklos (2002)p. 117
Eijffinger and Geraats (2004)p. 117
Stasavage (2003)p. 118
de Haan and Amtenbrink (2003)p. 120
Comparison between measuresp. 121
Conclusionsp. 122
Indicators of Independence, Accountability, and Transparencyp. 124
Methodology for assessing central bank independencep. 124
General considerationsp. 124
The GMT (1991) indexp. 124
The Cukierman (1992) indexp. 126
Assessment procedure and samplingp. 127
Methodology for assessing central bank accountability and transparencyp. 127
General considerationsp. 132
Detailed index of accountabilityp. 136
Detailed index of transparencyp. 145
Global Trends in Central Bank Governancep. 151
Global trends in central bank independencep. 151
Central bank independence in the late 1980sp. 152
Central bank independence as of end-2003p. 152
Developments in central bank independence over timep. 159
Global trends in central bank accountability and transparencyp. 163
Accountability scoresp. 163
Transparency scoresp. 167
Relationships between independence, accountability, and transparencyp. 170
Accountability and transparencyp. 170
Accountability and independencep. 173
Transparency and independencep. 175
Additional considerationsp. 178
Conclusionsp. 178
Global trends in central bank governancep. 179
Trends by stages of economic development and regionsp. 179
Relative deficit of accountabilityp. 179
Relative deficit of transparencyp. 182
Appendices:p. 187
Independence: country samplep. 187
Independence: political scores for advanced economies (2003)p. 190
Independence: political scores for emerging markets (2003)p. 192
Independence: political scores for developing countries (2003)p. 194
Independence: economic scores for advanced economies (2003)p. 198
Independence: economic scores for emerging markets (2003)p. 200
Independence: economic scores for developing countries (2003)p. 202
Independence: evolution for GMT sample (late 1980s-2003)p. 206
Independence: evolution for Cukierman sample (late 1980s-2003)p. 208
Independence: Summary indices (late 1980s-2003)p. 213
Accountability database (2006)p. 220
Transparency database (2006)p. 224
Detailed governance scoresp. 228
Independence and Inflation Performance: New Empirical Evidencep. 232
Policy Lessons from Global Trendsp. 237
Overviewp. 237
Relationships between the pillars of central bank governancep. 238
Consensus viewsp. 241
Set price stability as one of the primary objectives of monetary policyp. 242
Curtail direct lending to governmentsp. 242
ensure full independence for setting the policy ratep. 243
ensure no government involvement involvement in policy formulationp. 243
ensure that accountability corresponds to the level of independencep. 244
ensure that transparency corresponds to the level of accountability and financial market deepeningp. 244
Role of central banks in financial supervisionp. 245
Theoretical considerationsp. 245
Survey of practicesp. 247
The way forwardp. 249
Sequencing of reformsp. 251
clarify objectives and establish basic instrument independencep. 252
establish the building block of accountabilityp. 254
strengthen further political independence, accountability, and transparencyp. 255
Referencesp. 256
Indexp. 264
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