Corruption, central bank (in)dependence and optimal monetary policy in a simple model

Cavoli, Tony; Wilson, John K.

doi:10.1016/j.jpolmod.2015.03.012

Cited by 9 publications

(4 citation statements)

References 21 publications

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“…18. See Cavoli and Wilson (2015) for one of these theoretical models which supposes a link between corruption and central bank non-independence.…”

Section: Notesmentioning

confidence: 99%

“…Yet, we have very little idea about corruption in the world's central banks. Only a few studies like Jafari-Samimi and Ahmad ( 2001) and Cavoli and Wilson (2015) have attempted to grapple with the question directly. Researchers' sluggishness to collect these data reflects both the opacity and the general view of central banks as technocratic and insulated from corrupt incentives [14].…”

Section: Central Bank Purchasesmentioning

confidence: 99%

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When should central banks engage in private sector securities purchases?

Michael

Dalko

2023

JES

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Purpose The authors aim to look at the conditions under which central bank easing – and specifically the purchase of private sector securities – can/should contribute to growth, rather than fiscal policy and also ask when can the central bank’s purchase of private sector securities help supplant traditional monetary policy.Design/methodology/approachAfter surveying the existing literature, the authors use simple correlation of central bank private asset (stocks, bonds, etc.), interest rates, gross domestic product (GDP) growth, inflation and the extent of the functioning of domestic banking sectors (among others) to classify countries in which these purchases promote pro-growth investment.FindingsUnder the typical conditions for unconventional monetary policy, central bank purchases of private companies’ securities can promote growth in some places (like Bulgaria, the Ukraine, Georgia and Greece at the time of our writing) while hurting it in others (like in parts of Latin America and Africa in the mid-2010s). The authors find how such purchases effectively “bypass” dysfunctional banking systems and central/government local bodies fiscal spending, making the central bank the “funder of last resort” in many middle and lower income countries.Practical implicationsThis paper tells specific central banks to ramp up – or reduce – their purchases of private sector securities. The authors identify exact jurisdictions where such “helicopter money” has led to investment in the past economic growth.Originality/valueAll previous work on conventional and unconventional monetary policy has looked at the way monetary policy affects investment and growth through the banking system and holding companies’ reactions constant. The authors do the opposite – looking at how companies respond, holding banking system responses constant. No one has ever looked at these private purchases (taken from a special IMF database), much less tried to argue that central banks can sometimes target investment growth much better than fiscal policy. No one has ever considered them as a funder (rather than lender) of last resort.

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“…18. See Cavoli and Wilson (2015) for one of these theoretical models which supposes a link between corruption and central bank non-independence.…”

Section: Notesmentioning

confidence: 99%

Section: Central Bank Purchasesmentioning

confidence: 99%

When should central banks engage in private sector securities purchases?

Michael

Dalko

2023

JES

View full text Add to dashboard Cite

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“…Similarly, corruption can increase fiscal deficits and lead to substantial debt accumulation (Tanzi and Davoodi, 1998;Kaufmann, 2010;Achury et al, 2015). Corruption is sometimes coupled with fiscal dominance, leading to inflation and eroding the independence of monetary policy (Huang and Wei, 2006;Cavoli and Wilson, 2015). Furthermore, perception of extenstive corruption can lead to increased borrowing costs via higher risk premia and higher default risk (e.g., Akitoby and Stratmann, 2010).…”

Section: Literature Reviewmentioning

confidence: 99%

A Sentiment-Enhanced Corruption Perception Index

Zhan¹,

Hlatshwayo²,

Fan³

et al. 2021

IMF Working Papers

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Direct measurement of corruption is difficult due to its hidden nature, and measuring the perceptions of corruption via survey-based methods is often used as an alternative. This paper constructs a new non-survey based perceptions index for 111 countries by applying sentiment analysis to Financial Times articles over 2005-18. This sentiment-enhanced corruption perception index (SECPI) captures not only the frequncy of corruption related articles, but also the articles' sentiment towards corruption. This index, while correlated with existing corruption perception indexes, offers some distinct advantages, including heightened sensitivity to current events (e.g., corruption investigations and elections), availability at a higher frequency, and lower costs to update. The SECPI is negatively correlated with business environment and institutional quality. Increases in the perceived incidence or scope of corruption influences economic agents' behaviors, and thus economic dynamics. We found that when the SECPI is at least one standard deviation above the mean, the growth per capita falls by 0.65 percentage point on average, with more pronounced impacts for emerging market and low income countries.

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“…In the same line, Rajkumar and Swaroop (2008) find that some public expenditure policies perform most poorly in places with high corruption. Cavoli and Wilson (2015) show that corruption imposes an inflationary bias on the optimal monetary policy, and Kunieda,…”

Section: Introductionmentioning

confidence: 99%

Three essays on the use of neural networks for financial prediction

Sanz¹

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Corruption, central bank (in)dependence and optimal monetary policy in a simple model

Cited by 9 publications

References 21 publications

When should central banks engage in private sector securities purchases?

When should central banks engage in private sector securities purchases?

A Sentiment-Enhanced Corruption Perception Index

Three essays on the use of neural networks for financial prediction

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