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.

BERNARD LAURENS is at the International Monetary Fund.

MARCO ARNONE is at the Catholic University and CeMaFir, Milan.

List of Figures	p. x
List of Tables	p. xi
Notes on the Contributors	p. xiii
Foreword	p. xv
Preface	p. xvii
Acknowledgements	p. xix
Introduction	p. 1
Survey of Models and Indicators of Independence	p. 6
Introduction	p. 6
Base indicators of independence	p. 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 indicators	p. 25
Theoretical and empirical clarifications on central bank independence	p. 25
Endogenizing the inflation bias	p. 29
Robustness of independence measures	p. 32
Causality of hypotheses on central bank independence	p. 35
Robustness and sensitivity of results, and search for new measures	p. 41
Independence, credibility, and costs of deflation	p. 51
Conclusions	p. 59
Appendices:	p. 63
Variables in Cukierman's LVAU-LVAW indices	p. 63
Variables in Cukierman's QVAU-QVAW	p. 67
Summary of base indicators of de jure independence	p. 69
Summary of base indicators of de facto independence	p. 77
Summary of empirical studies of de jure independence	p. 81
Summary of empirical studies on de fact independence	p. 88
Survey of Models and Indicators on Accountability	p. 90
Responsibility and accountability	p. 90
Responsibility	p. 91
Accountability	p. 91
The concept of accountability in the literature	p. 93
Briault, Haldane, and King (1996): de jure and de facto accountability	p. 93
Bini-Smaghi and Gros (2000): ex ante and ex post accountability	p. 94
de Haan, Amtenbrink, and Eijffinger (1998): three main features	p. 95
Castellani (2002)	p. 97
Siklos (2002)	p. 97
Time inconsistency and accountability	p. 98
Delegating monetary policy to an independent central bank	p. 98
Override	p. 98
Contractual solution	p. 99
Indicators and measures of accountability	p. 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 results	p. 105
Survey of Models and Indicators of Transparency	p. 107
Introduction	p. 107
Rationales for transparency	p. 108
Boost central bank credibility	p. 108
Influence expectations	p. 108
Protect central bank independence	p. 109
Strengthen the understanding of monetary policy	p. 109
Reduce information asymmetries and uncertainity in financial markets	p. 110
Enhance market efficiency	p. 111
Eliminate government uncertainty on the performance of monetary policy	p. 111
Enhance fiscal and monetary policy coordination	p. 111
The concept of transparency in the literature	p. 111
Transparency and accountability	p. 111
Characteristics of transparency	p. 112
Aspects of transparency in the policy-making process	p. 114
Indicators and measures in the literature	p. 116
General observations	p. 116
Siklos (2002)	p. 117
Eijffinger and Geraats (2004)	p. 117
Stasavage (2003)	p. 118
de Haan and Amtenbrink (2003)	p. 120
Comparison between measures	p. 121
Conclusions	p. 122
Indicators of Independence, Accountability, and Transparency	p. 124
Methodology for assessing central bank independence	p. 124
General considerations	p. 124
The GMT (1991) index	p. 124
The Cukierman (1992) index	p. 126
Assessment procedure and sampling	p. 127
Methodology for assessing central bank accountability and transparency	p. 127
General considerations	p. 132
Detailed index of accountability	p. 136
Detailed index of transparency	p. 145
Global Trends in Central Bank Governance	p. 151
Global trends in central bank independence	p. 151
Central bank independence in the late 1980s	p. 152
Central bank independence as of end-2003	p. 152
Developments in central bank independence over time	p. 159
Global trends in central bank accountability and transparency	p. 163
Accountability scores	p. 163
Transparency scores	p. 167
Relationships between independence, accountability, and transparency	p. 170
Accountability and transparency	p. 170
Accountability and independence	p. 173
Transparency and independence	p. 175
Additional considerations	p. 178
Conclusions	p. 178
Global trends in central bank governance	p. 179
Trends by stages of economic development and regions	p. 179
Relative deficit of accountability	p. 179
Relative deficit of transparency	p. 182
Appendices:	p. 187
Independence: country sample	p. 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 scores	p. 228
Independence and Inflation Performance: New Empirical Evidence	p. 232
Policy Lessons from Global Trends	p. 237
Overview	p. 237
Relationships between the pillars of central bank governance	p. 238
Consensus views	p. 241
Set price stability as one of the primary objectives of monetary policy	p. 242
Curtail direct lending to governments	p. 242
ensure full independence for setting the policy rate	p. 243
ensure no government involvement involvement in policy formulation	p. 243
ensure that accountability corresponds to the level of independence	p. 244
ensure that transparency corresponds to the level of accountability and financial market deepening	p. 244
Role of central banks in financial supervision	p. 245
Theoretical considerations	p. 245
Survey of practices	p. 247
The way forward	p. 249
Sequencing of reforms	p. 251
clarify objectives and establish basic instrument independence	p. 252
establish the building block of accountability	p. 254
strengthen further political independence, accountability, and transparency	p. 255
References	p. 256
Index	p. 264
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Central Bank Independence, Accountability, and Transparency A Global Perspective

9780230201071

0230201075

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