Any Link between Legal Central Bank Independence and Inflation?: Evidence from Latin America and the Caribbean

By L. Jácome, Francisco Vázquez. Social Science Research Network, 2005

144 citations recorded by the source corpus.

This paper reviews central bank legislation in 24 countries in Latin America and the Caribbean during the 1990s. Using panel regressions, we find a negative relationship between legal central bank independence (CBI) and inflation. This result holds for three alternative measures of CBI and after controlling for international inflation, banking crises, and exchange regimes. The result is also robust to the inclusion of a broader indicator of structural reforms that usually go along with changes in central bank legislation, illustrating the complementary nature of various aspects of economic reform. The paper fails, however, to find a causal relationship running from CBI to inflation.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d72db42edfe74d75d67247165bd11d205ca52c58

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Citations in the corpus

Central Bank Independence and Transparency: Evolution and Effectiveness (2008, unknown): “…some recent measures of transparency and independence for subsets of countries (Eijffinger and Geraats, 2006; Cukierman, Miller, and Neyapti, 2002; Jácome and Vázquez, 2005), the measures here cover a more comprehensive set of countries and offer a more current picture.3 Our measures also…”
Central Bank Autonomy: Lessons from Global Trends (2007, background): “See Berger, Eijffinger, and de Haan (2000), Cukierman (2005), Jacome and Vazquez (2005) for a recent treatment.”
The Politics of Monetary Policy (2010, background): “Jacome and Vazquez (2005) present evidence based on Latin American and Caribbean data in favor of a negative relationship between CBI and in ation; but they also nd that using instrumental variables the signi cance of the correlation goes away. a country were anti in ation sentiments are present…”
Global Waves of Debt: Causes and Consequences (2021, background): “There was also a substantial shift toward central bank independence: Chile was the first country to implement legislation designed to greatly enhance central bank independence in 1989 and was shortly followed by many other LAC countries (Cukierman, Webb, and Neyapti 1992; Jácome and Vázquez 2008).”