Article2011

Replacing a “Disobedient” Central Bank Governor with a “Docile” One: A Novel Measure of Central Bank Independence and Its Effect on Inflation

58 citations0/0 files storedJournal of money credit and banking

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Monetary Policy and Economic Impact Banking stability, regulation, efficiency Fiscal Policies and Political Economy

Abstract

This paper identifies two mechanisms that empirical papers on central bank independence assume to be embedded in the yardstick measure of turnover rate of central bank governor: (i) the removal of a governor who is perceived as a challenger by the government and (ii) whether his/her replacement is an ally of the government. We identify the first mechanism with premature exits of central bankers and the second by examining whether or not the incoming governor is drawn from the ranks of the executive branch of the government. We find that only premature exits and replacements with government allies increase inflation.

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References

2000Financial intermediation and growth: Causality and causes 1985The Optimal Degree of Commitment to an Intermediate Monetary Target 1993Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence 1992Measuring the Independence of Central Banks and Its Effect on Policy Outcomes 1991Political and Monetary Institutions and Public Financial Policies in the Industrial Countries 1992Central Bank Strategy, Credibility, and Independence: Theory and Evidence 1993Openness and Inflation: Theory and Evidence 2004Financial Development, Financial Fragility, and Growth

Cited by

2022The politicisation of the European Central Bank and its emergency credit lines outside the Euro Area 2013Party politics and the survival of central bank governors 2016The Politics of Central Bank Independence 2023Central bank independence and inflation volatility in developing countries 2021Central bank independence, fiscal deficits and currency union: Lessons from Africa 2021Political influence, central bank independence and inflation in Africa: A comparative analysis

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