Abstract
The present paper uses a paneldata estimation technique to combine the time series for individual countries (Australia, Canada, France, Germany, Italy, Japan, the Netherlands, Switzerland, the United Kingdom and the United States). We postulated the response of central banks in these countries to inflation, economic growth and current account surplus given the constraints to be the same among the sample countries. Differences between central bank independence come forward in a different structural pressure to lower or raise money market rates in these countries. The empirical results in this study coincide remarkably well with the legal indices of central bank independence.
Similar content being viewed by others
References
Alesina, A. (1988). Macroeconomics and Politics. In S. Fischer (Ed.), NBER macroeconomics annual 1988, 13–61. Cambridge: MIT Press.
Alesina, A. (1989). Politics and business cycles in industrial democracies. Economic Policy 4: 55–98.
Alesina, A. and Grilli, V. (1992). The European Central Bank: Reshaping monetary politics in Europe. In M. Canzoneri, V. Grilli and P. Masson (Eds.), Establishing a central bank: Issues in Europe and lessons from the United States. Cambridge: Cambridge University Press and CEPR.
Alesina, A. and Summers, L. (1993). Central bank independence: Some comparative evidence. Journal of Money, Credit and Banking 25: 151–162.
Backus, D. and Driffill, J. (1985). Inflation and reputation. American Economic Review 75: 530–538.
Bade, R. and Parkin, M. (1988). Central bank laws and monetary policy. Working Paper, Department of Economics, University of Western Ontario.
Barro, R.J. and Gordon, D.B. (1983a). Rules, discretion and reputation in a model of monetary policy. Journal of Monetary Economics 12: 101–121.
Barro, R.J. and Gordon, D.B. (1983b). A positive theory of monetary policy in a natural rate model. Journal of Political Economy 91: 589–610.
Chow, G.C. (1960). Tests of equality between sets of coefficients in two linear regressions. Econometrica 28: 591–605.
Cukierman, A. (1992). Central bank strategy, credibility and independence: Theory and evidence. Cambridge: MIT Press.
De Haan, J. and Sturm, J.E. (1992). The case for central bank independence. Banca Nazionale del Lavoro Quarterly Review 45: 305–327.
Eijffinger, S. (1993). Convergence of monetary policies in Europe — Concepts, targets and instruments. In K. Gretschmann (Ed.), Economic and monetary union: Implications for national policy-makers, 169–193. Dordrecht: Martinus Nijhoff Publishers.
Eijffinger, S. (1994). A framework for monetary stability — General report. In J. de Beaufort Wijnholds, S. Eijffinger and L. Hoogduin (Eds.), A framework for monetary stability, 309–330. Papers and Proceedings of an International Conference organised by De Nederlandsche Bank and the CentER for Economics Research at Amsterdam, The Netherlands, October 1993. Dordrecht/Boston/London: Kluwer Academic Publishers.
Eijffinger, S. and Schaling, E. (1992). Central bank independence: Criteria and indices. Research Memorandum, Tilburg University, No. 548.
Eijffinger, S. and Schaling, E. (1993a). Central bank independence in twelve industrial countries. Banca Nazionale del Lavoro Quarterly Review 46: 49–89.
Eijffinger, S. and Schaling, S. (1993b). Central bank independence: Theory and evidence. Discussion Paper, Center for Economic Research, No. 9325.
Eijffinger, S. and De Haan, J. (1995). The political economy of central bank independence. Discussion Paper, Center for Economic Research, No. 9587. Forthcoming in: Princeton Special Papers in International Economics. Princeton: International Finance Section.
Friedman, M. (1962). Should there be an independent monetary authority. In L.B. Yeager (Ed.), In search of a monetary constitution, 219–243. Cambridge: Harvard University Press.
Grilli, V., Masciandaro, D. and Tabellini, G. (1991). Political and monetary institutions and public financial policies in the industrial countries. Economic Policy 6: 342–392.
Hsiao, C. (1986). Analysis of panel data. Cambridge: Cambridge University Press.
Koskela, E. and Virén, M. (1991). Monetary policy reaction functions and saving-investment correlations: Some cross-country evidence. Weltwirtschaftliches Archiv 127: 452–471.
Kydland, F.E. and Prescott, E.C. (1977). Rules rather than discretion: The inconsistency of optimal plans. Journal of Political Economy 85: 473–491.
Rogoff, K. (1985). The optimal degree of commitment to an intermediary monetary target. Quarterly Journal of Economics 100: 1169–1189.
Roll, E. et al. (1993). Independent and accountable: A new mandate for the Bank of England. London: Centre for Economic Policy Research.
Swinburne, M. and Castello-Branco, M. (1991). Central bank independence: Issues and experience. IMF Working Paper, No. 58.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Eijffinger, S., Van Rooij, M. & Schaling, E. Central bank independence: A paneldata approach. Public Choice 89, 163–182 (1996). https://doi.org/10.1007/BF00114284
Accepted:
Issue Date:
DOI: https://doi.org/10.1007/BF00114284