Any Link Between Legal Central Bank Independence and Inflation? Evidence from Latin America and the Caribbean

Author/Editor:

Luis Ignacio Jácome ; Francisco F. Vazquez

Publication Date:

April 1, 2005

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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 bank legislation in 24 countries in Latin America and the Caribbean during the 1990s. Using panel regressions, we find a negative relationship between legal central bank independence (CBI) and inflation. This result holds for three alternative measures of CBI and after controlling for international inflation, banking crises, and exchange regimes. The result is also robust to the inclusion of a broader indicator of structural reforms that usually go along with changes in central bank legislation, illustrating the complementary nature of various aspects of economic reform. The paper fails, however, to find a causal relationship running from CBI to inflation.

Series:

Working Paper No. 2005/075

Subject:

Banking Central bank autonomy Inflation Legal support in revenue administration Structural reforms

English

Publication Date:

April 1, 2005

ISBN/ISSN:

9781451860948/1018-5941

Stock No:

WPIEA2005075

Pages:

41

Please address any questions about this title to publications@imf.org