DP2353 Central Bank Independence: An Update of Theory and Evidence

Author(s): Helge Berger, Jakob de Haan, Sylvester C W Eijffinger
Publication Date: January 2000
Keyword(s): Central Bank Independence and Conservativeness, Inflation Targeting, Optimal Inflation Contracts
JEL(s): D72, E58
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2353

This paper reviews recent research on central bank independence (CBI). After we have distinguished between independence and conservativeness, the literature on optimal inflation contracts is discussed, followed by research in which the inflationary bias is endogenized. Finally, the various challenges that have been raised against previous empirical findings on CBI are reviewed. We conclude that the negative relationship between CBI and inflation is quite robust.