Bureaucratic Delegation and Political Institutions: When are Independent Central Banks Irrelevant?
World Bank, Development Research Group, Regulation and Competition policy, 2000 - Banca central - 48 pages
Does delegation of policymaking authority to independent agencies improve policy outcomes? This paper reports new theory and tests related to delegation of monetary policy to an independent central bank. The authors find that delegation reduces inflation only under specific institutional and political conditions.
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agenda control agenda setter agenda setting Annex bank's central bank governors central bank independence checks and balances closed list coefficient correlated with inflation Cukierman default outcome developing countries effect of checks effect on inflation estimates exec executive constraints specifications expected value GDP specification governor turnover impact independent central bank inflation bias inflation expectations inflation policy interaction term CBI lagged inflation legal central bank Legislature less inflation-averse less inflation-tolerant levels of checks levels of polarization log check loss functions Low pol high low polarization sub-sample negative Neyapti null parliamentary system percent pol high pol political actors political institutions political polarization predicted preferred inflation outcome presence of checks presidential systems probability propose an inflation reduce inflation regressions in Table robust shock is realized significant social polarization solve for expected standard errors supply shock tenure Testing proposition turnover of central turnover regressions veto players Webb