Central Bank Independence and Transparency: Evolution and Effectiveness

By Christopher Crowe, Ellen E. Meade. Social Science Research Network, 2008

352 citations recorded by the source corpus.

Over the past two decades, the pace of central bank reforms in terms of institutional independence and transparency has been particularly brisk. This paper examines the current level of central bank independence (CBI) and transparency in a broad sample of countries using newly constructed measures, and looks at the evolution in both measures from an earlier time period. The legal independence of central banks has increased markedly since the 1980s, while the rise in transparency since the late 1990s has been less impressive. Exploiting the time dimension of our data to eliminate country fixed effects and using instrumental variable estimation to overcome endogeneity concerns, we present robust evidence that greater CBI is associated with lower inflation. We also find that enhanced transparency practices are associated with the private sector making greater use of information provided by the central bank.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/eb7962e0daf2935435dc19298f8dd0225dada6f1

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Citations in the corpus

Trends in Monetary Policy Transparency (2009, neutral): “Crowe and Meade (2008) run a cross-section regression for 40 countries (12 of which are in the euro zone) and also find that their 22 transparency measure for 2003 is positively related to exchange rate flexibility and governance measures for regulatory quality and voice and accountability.”
Monetary Policy in Emerging Markets (2010, background): “Crowe and Meade (2008) examined CBI in an updated data set with a broad sample of countries.”
The political economy of reforms in central bank design: evidence from a new dataset (2018, neutral): “Finally, Crowe and Meade (2008) look at the change in the degree of independence between the index computed by Cukierman et al. (1992) in 1989 and its recomputed value in 2003.”
The Macroeconomic Costs and Benefits of the EMU and Other Monetary Unions: An Overview of Recent Research (2010, neutral): “7 See Christopher Crowe and Ellen E. Meade (2008).”
The Role of Central Bank Transparency for Guiding Private Sector Forecasts (2012, neutral): “In a similar vein, Crowe and Meade (2007, 2008) find that enhanced transparency practices are associated with the private sector making greater use of information provided by the central bank, which supports Crowe's (2006) finding that the introduction of inflation targeting (thereby increasing in…”
Disagreement Among Forecasters in G7 Countries (2012, background): “In the regressions below, we investigate how disagreement correlates with the variance σ2ε,t because permanent (2003), Creal, Koopman, and Zivot (2008), Giordani and Kohn (2008), and elsewhere.”
Does Economic Freedom Foster Tolerance (2013, neutral): “It is most naturally related to the area of economic freedom which most consistently is related to tolerance in baseline regressions, viz., EFI3 (access to sound money), in particular inflation rates (see, e.g., Acemoglu et al. 2008, Crowe and Meade 2008 and Cukierman 2008).”
The Politics of Monetary Policy (2010, methodology): “Crowe and Meade (2008) push the analysis further: looking at the change in the level of the four indexes above mentioned, they note that in the developing countries all of the indexes show a statistically signi cant increase since the 1980s, but in the advanced economies only the second and the…”
Central Bank Transparency and Independence: Updates and New Measures (2013, methodology): “1 Central Bank Transparency and Independence 195 In the paper closest to ours, Crowe and Meade (2008) construct indices of both the transparency and independence of central banks. They report transparency in 1998 and 2006 using criteria similar to ours.9 Their measures of transparency cover thirty-s”
Necessity As the Mother of Invention: Monetary Policy after the Crisis (2017, background): “Furthermore, since the ECB’s structure and powers are delineated in a treaty, which is nearly impossible to 26 See, for example, Cukierman et al. (1992) and Crowe and Meade (2008).”