شاخص های پویای استقلال بانک مرکزی و نرخ تورم : یک اکتشاف جدید تجربی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|27453||2013||14 صفحه PDF||سفارش دهید||11090 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Financial Stability, Volume 9, Issue 3, September 2013, Pages 385–398
It has been argued that economies with more independent central banks experience lower inflation over time. In this paper we show that this relationship is sensitive to the methodology through which central bank independence indices are constructed. We stress the importance of employing dynamic central bank independence indices in two ways. First, we perform unit root tests with structural breaks to verify if the implementation of central bank reforms represents a structural break for the inflation rate dynamics. Second, we implement a panel data analysis. We find evidence that legislative reforms that modify the degree of independence of a central bank have a strong impact on the inflation rate dynamics. Moreover, underlying the importance of employing dynamic central bank independence indices, we confirm the negative relationship between the latter and inflation for a sample of 10 OECD countries.
Rogoff (1985) emphasizes the importance of delegating the monetary policy to a central banker that places a larger weight on inflation rate stabilization relative to employment stabilization. Indeed, an independent policy maker might be able to implement credible monetary policies that will favor a lower inflation rate, thus eliminating the time inconsistency problem of government policies (Kydland and Prescott, 1977). Rogoff's seminal paper had a twofold effect, stimulating the implementation of central bank reforms on the policy side, and creating avenues for the design of indices suitable to capture the degree of independence of these institutions, on the research side. Starting with Bade and Parkin (1988), various studies have developed indices that proxy central bank independence, hereafter referred to as CBI (e.g. Alesina, 1988, Grilli et al., 1991, Cukierman, 1992, Cukierman et al., 1992 and Alesina and Summers, 1993). Following the introduction of these indicators, a burgeoning empirical literature began examining the relationship between CBI and inflation, economic growth and other macroeconomic variables.2 This paper has three main purposes. The first is to analyze the effectiveness of central bank reforms in guaranteeing a structurally lower level of inflation in each of the countries analyzed. The second is to re-examine if the negative relationship between CBI and inflation derived from previous cross-country studies still holds when employing dynamic CBI indices. Third, we update the central bank independence indices for the sample of selected countries until 2010. The empirical literature has examined the relationship between CBI and inflation employing indices based on the central bank legislation (de jure), or on the turnover rate of the central bank governor (de facto). Klomp and de Haan (2010)'s meta-regression analysis of 57 empirical studies shows that legal CBI indices have a negative relationship with inflation in OECD countries, especially during the 1970s. Moreover, studies based on de facto CBI remark a positive relationship between this indicator and inflation, even if the causality among these two variable is difficult to evaluate. Even if we disregard the sign of the relationship of these indices and inflation, it is important to notice how almost all of this literature is based on cross-country analyses. These approaches do not allow for an explicit evaluation of the impact of central bank law reforms on the inflation rate dynamics of each country. Furthermore, studies implemented considering the current level of CBI, might not be able to capture the effect of the evolution of this indicator. Consider, for example, the Deutsche Bundesbank which has been known, more than any other central bank, for its historical commitment to fight inflation (Clarida and Gertler, 1997), and is now characterized by almost the same degree of independence of the other euro area countries. More recent studies implement panel estimations considering time varying indicators. Cukierman et al. (2002), focusing on a group of newly created central banks of former socialist economies and controlling for cumulative liberalization and other variables, find no relationship between inflation and CBI during the 90s’. Jacome and Vazquez (2008) explore the effects of CBI on inflation for a sample of 24 Latin American and Caribbean countries during the period 1985–2002. Their results confirm the negative relationship between CBI and inflation. Arnone et al. (2009) and Laurens et al. (2009), using the Grilli et al. (1991) CBI indices for a group of developing countries and emerging markets, show the important role played by a more independent central bank in keeping a lower inflation rate. Acemoglu et al. (2008) analyze changes in the central bank legislation of 52 countries, during the period 1989–2003 and confirm that CBI is associated with a significant decline in inflation in countries with a medium level of political constraints. However, these studies do not specifically analyze the effect of structural reforms, such as the Maastricht Treaty and the euro or the Reserve Bank of New Zealand Act 1989, which have been implemented in more advanced economies during the last two decades and might impact inflation rate dynamics. In an effort to fill this gap, we reconstruct the evolution of CBI indices for 10 OECD countries, during the period 1972–2010. Our analysis relies on the CBI indices implemented by Grilli et al. (1991) (hereafter GMT). This methodology allows for the construction of indices able to capture the degree of political and economic independence of a central bank through the investigation of a wide number of characteristics concerning the organization and the activity of a central bank. We stress the importance of dynamic CBI indices and the magnitude of their changes on inflation in two ways. First, we verify the real impact of central bank law reforms on the inflation rate dynamics. We identify endogenous structural breaks in the inflation rate through unit root tests and compare the obtained break dates with the years of the central bank law reforms. Second, instead of measuring de jure CBI by a dummy variable that takes a value of one in every year after a major reform leading to increased independence (see Polillo and Guillén, 2005 and Acemoglu et al., 2008), we employ dynamic CBI indices in our panel data analysis. Indeed, even if the dummy variable approach partially mitigates the weakness of constant CBI indices, the introduction of dynamic ones might overcome this problem even further. This is due to the fact that the inflation rate dynamics might not only be affected by the current degree of CBI, but also by the magnitude of a reform and the length of time it has been in effect. The outline of the paper is as follows. Section 2 discusses the characteristics of the methodology adopted to compute CBI indices. The evolution of these indicators and the data are presented in Section 3, while Section 4 is dedicated to the study of the relationship between central bank law reforms and inflation rate dynamics. Our panel data analysis is presented and discussed in Section 5. Section 6 concludes.
نتیجه گیری انگلیسی
Several conclusions can be drawn from our study. Our results confirm the effectiveness of central bank reforms that highly modify the level of CBI, since these changes represent structural breaks for the inflation rate dynamics. This evidence confirms the belief that credible changes in the degree of independence of a central bank can affect the inflation rate dynamics by influencing the inflationary expectations of economic agents. Based on a panel data analysis for the period 1972–2010, this paper confirms the negative relationship between inflation and an index of economic independence, computed following the procedure set up by Grilli et al. (1991). In line with their results, we do not find a significant relationship between inflation and an index of political independence. Moreover, the negative relationship is confirmed analyzing both the Grilli et al. (1991) and the Cukierman et al. (1992) overall CBI indices. We provide evidence concerning the importance of computing dynamic CBI indices. Throughout our analysis we underline how the level of CBI changed drastically for some of the analyzed countries. Thus, by computing dynamic CBI indices, we are better able to capture the link between the degree of central bank independence and inflation. This is confirmed by comparing the estimates obtained by using dynamic CBI indices and the ones implemented with a dummy variable that captures changes in CBI indices, but not their magnitude. We focus here on a sample of advanced economies, however future research might investigate whether changes in central bank legislation represent structural breaks in inflation rate dynamics also for emerging markets and developing countries. For these economies, the results may differ, considering the previous evidence obtained by Cukierman et al. (1992) and Crowe and Meade (2008), due to the different economic and fiscal structure of these economies. The Global Financial Crisis brought new light to the concept of central bank independence and the need to reconsider the central bank's role for banking supervision (Masciandaro, 2012) and financial stability. However, new time inconsistency problems may arise in the presence of conflicting central bank objectives, i.e. price and financial stability (Valencia and Ueda, 2012). For this reason, future research might be directed to extending central bank independence indices to include not only indicators of central bank financial strength (Perera et al., 2012), but also the presence of possible conflicting objectives in the mandate of the central bank. Acknowledgements We are particularly grateful to the Editor, Iftekhar Hasan, the anonymous referee, Frédérique Bec and Cristina Terra for valuable suggestions. We would also like to thank Donato Masciandaro, Alex Cukierman, Pierre Siklos, Oana Peia and all the participants of Finlawmetrics 2012, organized by the Paolo Baffi Centre of Bocconi University (Milan, Italy), for useful comments. The usual disclaimer applies.