The Politics of Central Bank Independence

Haan, Jakob de; Eijffinger, Sylvester

doi:10.1093/oxfordhb/9780190469771.013.23

Cited by 15 publications

(18 citation statements)

References 38 publications

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“…These subjective opinions are corroborated by de Haan and Eijffinger (2016) using "objective" data provided by Bodea and Hicks (2015). These authors expanded the Cukierman et al (1992) index of legal central bank independence for 78 countries from the end of the Bretton Woods system until 2010, thereby creating an original data set that codes CBI annually and-importantly for current purposes-covers changes in the last twenty-five years.…”

Section: Was Central Bank Independence Compromised?mentioning

confidence: 94%

“…While the index remained stable for the Fed, the ECB and the Bank of England, the data suggest that, if anything, CBI increased after 2007. de Haan and Eijffinger (2016) using data from Bodea and Hicks (2015), which are available at: http://www.princeton.edu/~rhicks/data.html. The classification of countries follows the IMF's World Economic Outlook.…”

Section: Was Central Bank Independence Compromised?mentioning

confidence: 99%

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Necessity as the mother of invention: monetary policy after the crisis

Blinder

Ehrmann

Haan³

et al. 2017

Economic Policy

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158

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We ask whether recent changes in monetary policy due to the financial crisis will be temporary or permanent. We present evidence from two surveys-one of central bank governors, the other of academic specialists. We find that central banks in crisis countries are more likely to have resorted to new policies, to have had discussions about mandates, and to have communicated more. But the thinking has changed more broadly-for instance, central banks in non-crisis countries also report having implemented macro-prudential measures. Overall, we expect central banks in the future to have broader mandates, use macro-prudential tools more widely, and communicate more actively than before the crisis. While there is no consensus yet about the usefulness of unconventional monetary policies, we expect most of them will remain in central banks' toolkits, as governors who gain experience with a particular tool are more likely to assess that tool positively. Finally, the relationship between central banks and their governments might well have changed, with central banks "crossing the line" more often than in the past.

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Section: Was Central Bank Independence Compromised?mentioning

confidence: 94%

Section: Was Central Bank Independence Compromised?mentioning

confidence: 99%

Necessity as the mother of invention: monetary policy after the crisis

Blinder

Ehrmann

Haan³

et al. 2017

Economic Policy

Self Cite

158

View full text Add to dashboard Cite

show abstract

“…As with other Eastern European countries, the Fund was a critical driving force bethrough with an pre-announced monetary policy path and steer the expectations in the economy concerning longterm interest rates and thus inflation. With respect to inflation, a loss in monetary credibility implies that monetary authorities lose the ability to anchor inflation expectations which limits their ability rein in rampant inflation (for a survey of related literature, see, de Haan and Eijffinger (2019)).…”

Section: The Imf and Cbi Conditionalitymentioning

confidence: 99%

“…5 In addition, enhancing CBI can produce political benefits for a sitting government. In particular, an independent central bank represents a politically valuable scapegoat that can be blamed for the adverse consequences of such policy measures as raising interest rates or painful financial consolidations (de Haan and Eijffinger, 2019;Fernández-Albertos, 2015;Goodman, 1991). For instance, in the case of South Korea, the government's intention behind adopting CBI was to deflect blame for its own failure to deal with non-performing loans (Cargill, 2001).…”

Section: The Imf and Cbi Conditionalitymentioning

confidence: 99%

IMF conditionality and central bank independence

Kern

Reinsberg

Rau-Göhring

2019

European Journal of Political Economy

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This paper studies the role of the International Monetary Fund (IMF) in promoting central bank independence (CBI). While anecdotal evidence suggests that the IMF has been playing a vital role for CBI, the underlying mechanisms of this influence are not well understood. We argue that the IMF has ulterior motives when pressing countries for increased CBI. First, IMF loans are primarily transferred to local monetary authorities. Thus, enhancing CBI aims to insulate central banks from political interference to shield loan disbursements from government abuse.Second, several loan conditionality clauses imply a substantial transfer of political leverage over economic policy making to monetary authorities. As a result, the IMF through pushing for CBI seeks to establish a politically insulated veto player to promote its economic policy reform agenda. We argue that the IMF achieves these aims through targeted lending conditions. We hypothesize that the inclusion of these loan conditions leads to greater CBI. To test our hypothesis, we use a recently available dataset on IMF programs that includes detailed information on CBI reforms and IMF conditionality for up to 124 countries between 1980 and 2012. Our findings indicate that targeted loan conditionality plays a critical role in promoting CBI. These results are robust towards varying modeling assumptions and withstand a battery of robustness checks. * We are grateful to Jan-Egbert Sturm, three anonymous reviewers, and the editors at the European Journal of Political Economy for providing excellent comments and suggestions. We also want to thank Sharat Ganapati, Irfan Nooruddin, Nita Rudra, Gerald Schneider, and Carole Sargent for very helpful comments. We are also thankful for feedback from the participants in seminars at the European Central Bank, Georgetown University, and the IR research cluster at the University of Glasgow. Caitlin Chamberlain provided outstanding research assistance. All errors remain ours.

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“…Similar to the situation today, the Bank of Turkey raised interest rates by 4000 basis in its attempt to contain speculative attacks on the Turkish Lira in 2000, triggering the most severe financial crisis in Turkish history (Arpac and Bird, 2009). In these situations, prescribing nominal measures such as propping up interest rates or enforcing limits on domestic credit creation are ineffective to get hold of speculative dynamics (de Haan and Eijffinger, 2019). Thus, strengthening the institutional foundations of monetary policymaking towards greater political independence sends investors a strong signal that a government is invested in restoring the corroded credibility of monetary authorities (Blejer et al, 2002;Masciandaro and Romelli, 2018).…”

Section: Argumentmentioning

confidence: 99%