Legal Central Bank Independence and Inflation in Latin America During the 1990s

Author/Editor:

Luis Ignacio Jácome

Publication Date:

December 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper reviews central banks’ legal reform in Latin America during the 1990s and discusses the status of central bank independence in the region. Based on this information, it builds a simplified index of central bank independence which, in addition to the commonly used criteria of political and economic independence, incorporates provisions of central banks’ financial autonomy, accountability, and lender-of-last-resort. The paper finds a moderate negative correlation between increased central bank independence and inflation during 1999–2001 in 14 Latin American countries. Dissagregating the index, the same analysis suggests that economic independence is the key component driving the observed negative correlation between legal central bank independence and inflation.

Series:

Working Paper No. 2001/212

Subject:

Banking Central bank accountability Central bank autonomy Central bank legislation Central banks Inflation Legal support in revenue administration Prices Revenue administration

English

Publication Date:

December 1, 2001

ISBN/ISSN:

9781451874891/1018-5941

Stock No:

WPIEA2122001

Pages:

41

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