Skip to main content

Peer Effects in Central Banking

IMF Economic Review volume 68, pages 764–814 (2020)Cite this article

Abstract

We provide a new explanation for why central banks have become transparent over the last three decades. We apply recently developed social interaction panel regression models for the observational data, which allow the identification of peer effects. The identification is based on variations in the past monetary policy regime exogenously determined with respect to transparency. Previous literature has argued that domestic factors such as macroeconomic stability were behind the trend toward greater transparency. In contrast, our results indicate that transparency primarily increased because of a favorable global environment and, importantly, because of the peer effects among central bankers. Central bankers thus learned from each other’s experiences regarding transparency.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Fig. 1

Notes

  1. Manski (1993) also notes that “These effects may, depending on the context, be called “social norms,” “peer influences,” “neighborhood effects,” “conformity,” “imitation,” “contagion,” “epidemics,” “bandwagons,” “herd behavior,” “social interactions,” or “interdependent preferences”. Therefore, Manski (1993) states that the interpretation of peer effects depends on the context. We suppose that, in the context of central banks, peer effects largely coincide with learning, in the sense of both voluntary learning from experience of other central banks and peer pressure. We support this claim with the extensive anecdotal evidence provided in the following section.

  2. These models have been typically applied to analyze individual behavior. Decisions made at central banks are typically collective (Reis 2013) and are made by a handful of central bank officials, although they are sometimes strongly influenced by the governor (Blinder et al. 2009). On a global scale, the average number of monetary policy committee members is approximately 5–7, which is slightly higher than the typical household. The peer effects among households in terms of consumption are examined by Maurer and Meier (2008) and Krishnan and Patnam (2014).

  3. Leitemo and Roisland (2002) study the choice of monetary policy regimes and also note that this choice is motivated to achieve the target of stable inflation, exchange rate, or growth.

  4. Instead of actual monetary policy regimes, we also randomly generate the regimes in one of our robustness checks. In this case, as expected, peer effects disappear.

  5. Some of our robustness checks also consider membership in economic unions and in IMF regional departments as the measure of interaction.

  6. Gibbons and Overman (2012) discuss the importance of identification for applied spatial econometric model exercises and argue that, without proper identification, spatial econometrics is pointless. Volden et al. (2008) formally show that the diffusion of policy experiments due to learning from each others’ experiences is often indistinguishable from the independent adoption of policy experiments; therefore, an identification strategy to distinguish between these two effects is critical.

  7. In one of our robustness checks, we also use data on how central banks are transparent about their financial stability assessment from Horvath and Vasko (2016).

  8. The European Central Bank data are used to assess monetary policy transparency in the euro area, and the explanatory variables are averaged across the member countries in this case (unless they are readily available at the euro area aggregate level). Financial stability transparency is assessed at the country level. Noteworthy is that our results remain largely the same if we exclude the euro area countries from our sample. The list of countries is as follows: Albania, Argentina, Armenia, Aruba, Australia, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Bermuda, Bhutan, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cuba, Czech Republic, Denmark, Egypt, El Salvador, Estonia, Ethiopia, Euro Area countries, Fiji, Georgia, Ghana, Guatemala, Guyana, Hong Kong, Hungary, Iceland, India, Indonesia, Iraq, Israel, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Korea, Kuwait, Kyrgyzstan, Latvia, Lesotho, Libya, Lithuania, Malawi, Malaysia, Malta, Mauritius, Mexico, Mongolia, Namibia, New Zealand, Nigeria, Norway, Oman, Pakistan, Papua New Guinea, Peru, the Philippines, Poland, Qatar Republic, Moldova, Romania, Russian Federation, Rwanda, Saudi Arabia, Sierra Leone, Singapore, Slovak Republic, Slovenia, Solomon Islands, South Africa, Sri Lanka, Sudan, Sweden, Switzerland, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Arab Emirates, United Kingdom, Uruguay, United States, Vanuatu, Yemen, and Zambia.

  9. The working paper version contains an illustrative theoretical model along the lines of Calvó-Armengol et al. (2009) and Davezies et al. (2009) and derives the empirical specification used in this article.

  10. Bramoullé et al. (2009) estimate the peer effects model as in Eq. (1) to analyze the participation in recreational activities. The dependent variable in their model is an index of participation with values from 0 to 4. Therefore, the nature of their dependent variable is identical to our central bank transparency indexes.

  11. As an alternative, we classify countries according to the most common monetary policy regime that they had in 2000–2011. In principle, the common monetary policy regime can be endogenous to transparency scores even though the degree of endogeneity is likely to be low. In this case, we have 34 countries with exchange rate anchoring, 16 with monetary targeting, 27 with inflation targeting, and 33 with another regime, including fund-supported or other monetary programs and IMF-supported or other monetary programs.

  12. Despite commonly held beliefs, LeSage and Pace (2011) show that the statistical inference in spatial econometric models is not very sensitive to the particular specifications used for the spatial weight structure in these models. Our results presented in the following section support this finding.

  13. It is worth noting that an alternative such as the trade intensity among countries could, in principle, work as well, but trade links are instrumented by geographical distance in most empirical research on international trade.

  14. We use the following economic unions to generate our matrix W: 1. CARICOM Single Market and Economy - CSME, 2. European Union - EU, 3. Eurasian Economic Union - EAEU, 4. Southern Common Market - MERCOSUR, 5. Gulf Cooperation Council - GCC, 6. Central American Integration System - SICA, 7. The Association of Southeast Asian Nations - ASEAN, 8. Economic Community of West African States - ECOWAS, 9. Common Market for Eastern and Southern Africa - COMESA, 10. European Free Trade Association - EFTA, 11. Greater Arab Free Trade Area - GAFTA, 12. North American Free Trade Agreement - NAFTA, and 13. Other. The membership is as of the year 2000 (given that the regressions use data from 2001 to 2010).

  15. The IMF’s regional departments are as follows: African Department, Asia and Pacific Department, European Department, Middle East and Central Asia Department, and Western Hemisphere Department.

  16. Note that Davezies et al. (2009) show that the model in Lee (2007) is identifiable even if group members are not observed.

  17. The main issue is how to recover structural parameters from the reduced-form model. To understand the mechanics of model identification, expressing our regression equation as the within-group transformation is useful to eliminate the unobserved effects (group-invariant correlated effects) and present it separately for each monetary policy regime (group, R). Therefore, we obtain the following equation for central banks in the monetary policy regime R:

    $$\begin{aligned} y_{R,i}-\tilde{y_{R}}=\frac{\beta _{1}-\frac{\beta _{2}}{m_{R}-1}}{1+\frac{\lambda }{m_{R}-1}}(x_{R,i}-\tilde{x_{R}})+\frac{1}{1+\frac{\lambda }{m_{R}-1}}+(\epsilon _{R,i}-\tilde{\epsilon _{R}}) \end{aligned}$$
    (2)

    where \(\tilde{y_{r}}\), \(\tilde{x_{r}}\) and \(\tilde{\epsilon _{r}}\) are calculated using all central banks in the single monetary policy regime. There are three parameters—\(\lambda\), \(\beta _{1}\), and \(\beta _{2}\)—to be estimated in the equation; therefore, we need at least three different group sizes, m, to recover the structural parameters.

  18. Lee (2007) also finds that conditional maximum likelihood estimates are more efficient than those from two-stage least squares. Therefore, we do not estimate Eq. (1) using the latter technique.

  19. Finally, it is of interest to evaluate whether peer effects are concentrated in some specific dimensions of monetary policy transparency. However, estimating these regressions due to insufficient variation in the subcomponents of the monetary policy index is not possible. The overall monetary policy index consists of five subcomponents: political, economic, procedural, policy, and operational transparency. As previously noted, the frequency of changes in the overall monetary policy transparency index is 24%. Because we have 5 different subcomponents, on average, the frequency of changes in the subcomponent is 24/5, which is approximately 5%. This result implies that, on average, the subcomponent changes once in 20 years. For this reason, virtually no panel data research exists on the determinants of the subcomponents of monetary policy transparency.

  20. In this regard, Conley and Udry (2010) emphasize that the adoption of new technologies (or the adoption of policy experiments, as in our case) may be spatially and serially correlated, not necessarily because of learning but because of some other omitted variable. These authors stress that the proper identification of social learning requires detailed data to control for otherwise confounding factors. Conley and Udry (2010) note that “Spatial proximity is correlated with the presence of information links, but it is not their sole determinant. Information links occur over long as well as short distances”.

  21. Note that the other monetary policy group includes countries, such as Albania or Armenia. These countries subsequently adopted inflation targeting, and they were labeled as the “other” group because they initially lacked an exchange rate anchor or explicit inflation target. The “other” group also includes countries such as Belarus or Kazakhstan, which progressed from the “other” regime to the exchange rate anchor. The “other” group often consists of countries with the general ambition to safeguard price stability but did not accompany it with any explicit exchange rate anchor or inflation (or monetary) target.

  22. The number of observations in the regressions is slightly lower than 300 because of missing observations.

  23. However, regardless of whether the error term has or does not have the spatial structure, the peer effects remain significant.

  24. Clearly, the matrix W would have the values of 1 in all of its elements (outside the diagonal).

  25. The procedure for the Monte Carlo simulation is as follows: (1) Model is estimated with actual data. (2) The coefficient estimates from step 1 are taken as the true parameters, and the peer effect coefficient is set to 0.05. (3) Errors are randomly generated, and the dependent variable is calculated. (4) The coefficients are estimated with the dependent variable from step 3, and the estimates are saved. (5) Steps 3 and 4 are repeated 1000 times. The peer effects parameter is then consecutively increased to 0.1, 0.15, ..., 0.95.

  26. Intuitively, a direct effect shows that when country i increases the rule of law, what will be the average impact on the central bank’s transparency in country i? To obtain the average direct effect, one needs to average across all countries. The indirect effects show the impact of all other countries raising their rule of law on central bank transparency on an individual country, again averaged over all countries.

References

  • Anderlini, L., and A. Ianni. 1996. Path Dependence and Learning from Neighbors. Games and Economic Behavior 13 (2): 141–177.

    Google Scholar 

  • Angeletos, G.-M., and A. Pavan. 2007. Efficient Use of Information and Social Value of Information. Econometrica 75 (4): 1103–1142.

    Google Scholar 

  • Bank of Botswana. 2008. Annual Report.

  • Bayer, P., S.L. Ross, and G. Topa. 2008. Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes. Journal of Political Economy 116 (6): 1150–1196.

    Google Scholar 

  • Bertrand, M., E.F.P. Luttmer, and S. Mullainathan. 2000. Network Effects and Welfare Cultures. Quarterly Journal of Economics 115: 1019–1056.

    Google Scholar 

  • BIS 2006. Central Bank and the Challenge of Development. Base: Bank for International Settlements.

    Google Scholar 

  • Blinder, A.S., M. Ehrmann, J. de Haan, and D.J. Jansen. 2017. Necessity as the Mother of Invention: Monetary Policy After the Crisis. Economic Policy 32: 707–755.

    Google Scholar 

  • Blinder, A.S., M. Ehrmann, M. Fratzscher, J. de Haan, and D.J. Jansen. 2009. Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence. Journal of Economic Literature 46 (4): 910–945.

    Google Scholar 

  • Blume, L., W. Brock, S. Durlauf, and R. Jayaraman. 2015. Linear Social Interactions Models. Journal of Political Economy 123: 444–496.

    Google Scholar 

  • Borio, C., G. Toniolo, and P. Clement (eds.). 2008. The Past and Future of Central Bank Cooperation. Cambridge: Cambridge University Press.

    Google Scholar 

  • Boucher, V., Y. Bramoulle, H. Djebbari, and B. Fortin. 2012. Do Peers Affect Student Achievement? Evidence from Canada Using Group Size Variation. Journal of Applied Econometrics 29: 91–109.

    Google Scholar 

  • Bramoullé, Y., H. Djebbari, and B. Fortin. 2009. Identification of Peer Effects Through Social Networks. Journal of Econometrics 150 (1): 41–55.

    Google Scholar 

  • Buera, F., A. Monge-Naranjo, and G.E. Primiceri. 2011. Learning the Wealth of Nations. Econometrica 79 (1): 1–45.

    Google Scholar 

  • Callander, S., and B. Harstad. 2015. Experimentation in Federal Systems. Quarterly Journal of Economics 130 (2): 951–1002.

    Google Scholar 

  • Calvó-Armengol, A., E. Patacchini, and Y. Zenou. 2009. Peer Effects and Social Networks in Education. Review of Economic Studies 76: 1239–1267.

    Article  Google Scholar 

  • Conley, T., and C. Udry. 2010. Learning About a New Technology: Pineapple in Ghana. The American Economic Review 100: 35–69.

    Google Scholar 

  • Cornand, C., and F. Heinemann. 2008. Optimal Degree of Public Information Dissemination. Economic Journal 118: 718–742.

    Google Scholar 

  • Crowe, C. 2010. Testing the Transparency Benefits of Inflation Targeting: Evidence from Private Sector Forecasts. Journal of Monetary Economics 57: 226–232.

    Google Scholar 

  • Crowe, C., and E.E. Meade. 2008. Central Bank Independence and Transparency: Evolution and Effectiveness. European Journal of Political Economy 24: 763–777.

    Google Scholar 

  • Cukierman, A. 2009. The Limits of Transparency. Economic Notes 38 (1–2): 1–37.

    Google Scholar 

  • Dale, S., A. Orphanides, and P. Österholm. 2011. Imperfect Central Bank Communication—Information Versus Distraction. International Journal of Central Banking 7 (2): 3–39.

    Google Scholar 

  • Davezies, L., X. d’Haultfoeuille, and D. Fougere. 2009. Identification of Peer Effects Using Group Size Variation. Econometric Journal 12: 397–413.

    Google Scholar 

  • Dincer, N., and B. Eichengreen. 2014. Central Bank Transparency and Independence: Updates and New Measures. International Journal of Central Banking 5: 189–253.

    Google Scholar 

  • Egger, P., M. Fahn, V. Merlo, and G. Wamser. 2014. On the Genesis of Multinational Foreign Affiliate Networks. European Economic Review 65: 136–163.

    Google Scholar 

  • Ehrmann, M., S. Eijffinger, and M. Fratzscher. 2012. The Role of Central Bank Transparency for Guiding Private Sector Forecasts. Scandinavian Journal of Economics 114 (3): 1018–1052.

    Google Scholar 

  • Eijffinger, S., and P. Geraats. 2006. How Transparent are Central Banks? European Journal of Political Economy 22: 1–22.

    Google Scholar 

  • Geraats, P. 2009. Monetary Policy? Scandinavian Journal of Economics 106: 299–313.

    Google Scholar 

  • Gerlach-Kristen, P. 2004. Is the MPC’s Voting Record Informative About Future UK Monetary Policy? Scandinavian Journal of Economics 106: 299–313.

    Google Scholar 

  • Gibbons, S., and H.G. Overman. 2012. Mostly Pointless Spatial Econometrics? Journal of Regional Science 52 (2): 172–191.

    Google Scholar 

  • Goldstein, I., and H. Sapra. 2014. Should Banks’ Stress Test Results be Disclosed? An Analysis of the Costs and Benefits with Haresh Sapra. Foundations and Trends in Finance 8: 1–54.

    Google Scholar 

  • Helmers, C., and M. Patnam. 2014. Does the Rotten Child Spoil his Companion? Spatial Peer Effects Among Children in Rural India. Quantitative Economics 5 (1): 67–121.

    Google Scholar 

  • Horvath, R., K. Šmídková, and J. Zápal. 2012. Central Banks’ Voting Record and Future Policy. International Journal of Central Banking 8 (4): 1–19.

    Google Scholar 

  • Horvath, R., and D. Vasko. 2016. Central Bank Transparency and Financial Stability. Journal of Financial Stability 22: 45–56.

    Google Scholar 

  • James, J.G., and P. Lawler. 2011. Optimal Policy Intervention and the Social Value of Public Information. American Economic Review 101 (4): 1561–74.

    Google Scholar 

  • Kool, C., M. Middeldorp, and S. Rosenkranz. 2011. Central Bank Transparency and Crowding Out of Private Information in Financial Markets. Journal of Money, Credit and Banking 43 (4): 765–774.

    Google Scholar 

  • Krishnan, P., and M. Patnam. 2014. Neighbors and Extension Agents in Ethiopia: Who Matters More for Technology Adoption? American Journal of Agricultural Economics 96: 308–327.

    Google Scholar 

  • Lee, L. 2007. Identification and Estimation of Econometric Models with Group Interactions, Contextual Factors and Fixed Effects. Journal of Econometrics 140: 333–374.

    Google Scholar 

  • Lee, L., X. Liu, and X. Lin. 2010. Specification and Estimation of Social Interaction Models with Network Structures. Econometrics Journal 13: 145–176.

    Google Scholar 

  • Leitemo, K., and O. Roisland. 2002. The Choice of Monetary Policy Regime for Small Open Economies. Annales d’Economie et de Statistique 67–68: 463–494.

    Google Scholar 

  • Lepetyuk, V., and C.A. Stoltenberg. 2013. Policy Announcements and Welfare. Economic Journal 123 (571): 962–997.

    Google Scholar 

  • LeSage, J., R.K. Pace. 2011. The Biggest Myth in Spatial Econometrics. Technical report, presented at the 50th Southern Regional Science Association Annual Meeting, New Orleans, LA, March 26.

  • Liedorp, F., R. Mosch, C. van der Cruijsen, and J. de Haan. 2013. Transparency of Banking Supervisors. IMF Economic Review 61: 310–335.

    Google Scholar 

  • Lin, X. 2010. Identifying Peer Effects in Student Academic Achievement by Spatial Autoregressive Models with Group Unobservables. Journal of Labor Economics 28 (4): 825–860.

    Google Scholar 

  • Manski, C. 1993. Identification of Endogenous Social Effects: The Reflection Problem. Review of Economic Studies 60 (3): 531–542.

    Google Scholar 

  • Maurer, J., and A. Meier. 2008. Smooth It Like the ’Joneses’? Estimating Peer-Group Effects in Intertemporal Consumption Choice. Economic Journal 118 (527): 454–476.

    Google Scholar 

  • Meade, E.E., and D. Stasavage. 2008. Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve. Economic Journal 118 (528): 695–717.

    Google Scholar 

  • Melecky, M., and A.M. Podpiera. 2013. Institutional Structures of Financial Sector Supervision, Their Drivers and Historical Benchmarks. Journal of Financial Stability 9 (3): 428–444.

    Google Scholar 

  • Morris, S., and H.S. Shin. 2002. Social Value of Public Information. American Economic Review 92 (5): 1521–34.

    Google Scholar 

  • Pace, K., and J. LeSage. 2006. Handbook of Regional Science, 1535–1552. Berlin: Springer.

    Google Scholar 

  • Posen, A.S. 2003. Six Practical Views of Central Bank Transparency. Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart 1: 53–172.

    Google Scholar 

  • Reis, R. 2013. Central Bank Design. Journal of Economic Perspectives 27 (4): 17–44.

    Google Scholar 

  • Saez, E., and E. Duflo. 2003. The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment. Quarterly Journal of Economics 118: 815–842.

    Google Scholar 

  • Simmons, B.A., and Z. Elkins. 2004. The Globalization of Liberalization: Policy Diffusion in the International Political Economy. American Political Science Review 98 (1): 171–189.

    Google Scholar 

  • Svensson, L. 2006. Social Value of Public Information: Comment: Morris and Shin (2002) is Actually Pro-transparency, Not Con. American Economic Review 96 (1): 448–452.

    Google Scholar 

  • van der Cruijsen, C., S. Eijffinger, and L. Hoogduin. 2010. Optimal Central Bank Transparency. Journal of International Money and Finance 29 (8): 1482–1507.

    Google Scholar 

  • Volden, C., M.M. Ting, and D.P. Carpenter. 2008. A Formal Model of Learning and Policy Diffusion. American Political Science Review 102 (03): 319–332.

    Google Scholar 

  • Walsh, C.E. 2007. Optimal Economic Transparency. International Journal of Central Banking 3 (1): 5–36.

    Google Scholar 

  • Woodford, M. 2007. The Case for Forecast Targeting as a Monetary Policy Strategy. Journal of Economic Perspectives 21 (4): 3–24.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Institute of Economic Studies, Charles University, Opletalova 26, 110 00, Prague 1, Czech Republic

    Roman Horvath

Authors
  1. Roman Horvath
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Roman Horvath.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

We thank the Editor, Emine Boz, the two anonymous referees, Peter Claeys, Fabrizio Coricelli, Michal Franta, Martin Gregor, Christopher Hartwell, Klodiana Istrefi, Evzen Kocenda, Michele Lenza, Katarina Lucivjanska, Alexander Michaelides, Michael Moritz, Morten Ravn, Lucjan Orlowski, Jakub Seidler, Raju Singh, Cedric Tille, Borek Vasicek, Jan Zapal, and seminar participants at the Friedrich-Alexander-Universitat Erlangen-Nurnberg, Leibniz Institute for East and Southeast European Studies, Czech Economic Society conference, European Public Choice Society conference, ICMAIF conference, Society for the Study of Emerging Markets conference, European Association for Comparative Economic Studies conference, Networks, Complexity and Economic Development workshop, Swiss Society for Economics and Statistics annual conference, and Slovak Economic Association annual conference for their helpful comments. Pavla Brizova, Daniil Kashkarov, Tomas Krehlik, Boril Sopov, and Ivan Trestcov provided excellent research assistance. We acknowledge support from the Grant Agency of the Czech Republic 19-15650S. Online appendix is available at https://ies.fsv.cuni.cz/en/staff/horvath.

Electronic supplementary material

Below is the link to the electronic supplementary material.

Supplementary material 1 (xlsx 1131 KB)

Appendix

Appendix

1.1 Data Definitions and Sources

Monetary policy transparency index: An index of monetary policy transparency taking values between 0 and 15. Dincer and Eichengreen (2014).

Financial stability transparency index: An index of financial stability transparency taking values between 0 and 15. Horvath and Vasko (2016).

GDP p.c.: GDP per capita in current USD. International Monetary Fund.

Past inflation: % change in the consumer price index. International Monetary Fund.

Openness: Exports of goods and services as a percentage of GDP. World Bank.

Financial depth: Private credit as a percentage of GDP. World Bank.

Rule of Law: Captures perceptions of the extent to which agents have confidence in and abide by the rules of society and, in particular, the quality of contract enforcement, property rights, the police, and the courts as well as the likelihood of crime and violence. Ranges from -2.5 (the lowest possible score) to 2.5 (the highest possible score). The Worldwide Governance Indicators - World Bank.

Voice and Accountability: Captures perceptions of the extent to which a country’s citizens are able to participate in selecting their government as well as freedom of expression, freedom of association, and a free media. Ranges from -2.5 (the lowest possible score) to 2.5 (the highest possible score). The Worldwide Governance Indicators - World Bank.

Government efficiency: Captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies. Ranges from -2.5 (the lowest possible score) to 2.5 (the highest possible score) The Worldwide Governance Indicators - World Bank.

Political stability and the absence of violence: Measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically motivated violence and terrorism. Ranges from -2.5 (the lowest possible score) to 2.5 (the highest possible score). The Worldwide Governance Indicators - World Bank.

Democracy: Ordinal variable taking values from 0 to 10 that measures the level of democracy in the country by deliberating three main elements: 1. ”presence of institutions and procedures through which citizens can express effective preferences about alternative policies and leaders”, 2. ”the existence of institutionalized constraints on the exercise of power by the executive”, and 3. ”the guarantee of civil liberties to all citizens in their daily lives and in acts of political participation.” Polity IV.

Autocracy: Ordinal variable taking values from 0 to 10 measuring the level of autocracy in the country, taking into account the essential attributes: “chief executives are chosen in a regularized process of selection within the political elite, and once in office, they exercise power with few institutional constraints.” Polity IV.

Overall polity score: The difference between the democratic score and the autocratic score. Ranges from \(+\) 10 (for the most democratic countries) to − 10 (for the most autocratic countries). Polity IV (Figs. 2, 3, 4 and Tables 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19).

Table 7 Determinants of monetary policy transparency: common monetary policy regime
Full size table
Table 8 Determinants of monetary policy transparency: lagged regressors
Full size table
Table 9 Determinants of monetary policy transparency: time effects
Full size table
Table 10 Determinants of monetary policy transparency: membership in economic unions
Full size table
Table 11 Determinants of financial stability framework transparency: geographical distance
Full size table
Table 12 Determinants of financial stability framework transparency: common monetary policy regime, controlling for supervisory structure
Full size table
Table 13 Determinants of financial stability framework transparency: geographical distance, controlling for supervisory structure
Full size table
Table 14 Determinants of monetary policy transparency: no change in monetary policy regime
Full size table
Table 15 Determinants of monetary policy transparency: only exchange rate targeters included
Full size table
Table 16 Determinants of monetary policy transparency: only monetary targeters included
Full size table
Table 17 Determinants of monetary policy transparency: only inflation targeters included
Full size table
Table 18 Determinants of monetary policy transparency: only central banks with “other” policy regime
Full size table
Table 19 Determinants of monetary policy transparency: W randomly generated
Full size table
Fig. 2
figure 2

Evolution of monetary policy transparency: different regimes. Notes the figure presents the evolution of monetary policy transparency indexes for the different monetary policy regimes

Full size image
Fig. 3
figure 3

Reversals in monetary policy transparency. Notes: the figure presents the number of reversals of monetary policy transparency indexes over time. The reversal denotes the situation in which the value of the transparency index decreases with respect to the previous year

Full size image
Fig. 4
figure 4

Monte Carlo simulations: true versus simulated values. Note: the figures compare the simulated to the true values of the peer effect coefficient. The diagonal line pictures the true value; the dots represent the corresponding simulated values for the peer effect coefficient. The simulated values closer to the diagonal line suggest a smaller bias of our estimator

Full size image

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Horvath, R. Peer Effects in Central Banking. IMF Econ Rev 68, 764–814 (2020). https://doi.org/10.1057/s41308-020-00121-5

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41308-020-00121-5

JEL Classificaion

  • C31
  • D83
  • E58