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Central Bank Independence, Accountability, and Transparency: A Global Perspective PDF

290 Pages·2009·1.285 MB·English
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CentralBankIndependence,Accountability,andTransparency AlsobyMarcoArnone: PRIMARYDEALERSINGOVERNMENTSECURITIES (Co-author)March2005 IIVENTURECAPITALPERLOSVILUPPO–UNAANALISIDEIPAESIEMERGENTI (Co-author)January2006 THECOSTOFCORRUPTION–ECONOMIC,INSTITUTIONALANDSOCIAL EFFECTS (Co-author)revisedEnglishedition,2007 Central Bank Independence, Accountability, and Transparency A Global Perspective Bernard J. Laurens Marco Arnone Jean-François Segalotto ©InternationalMonetaryFund2009 Softcover reprint of the hardcover 1st edition 2015 978-0-230-20107-1 Allrightsreserved.Noreproduction,copyortransmissionofthispublication maybemadewithoutwrittenpermission. Noportionofthispublicationmaybereproduced,copiedortransmitted savewithwrittenpermissionorinaccordancewiththeprovisionsofthe Copyright,DesignsandPatentsAct1988,orunderthetermsofanylicence permittinglimitedcopyingissuedbytheCopyrightLicensingAgency, SaffronHouse,6–10KirbyStreet,LondonEC1N8TS. Anypersonwhodoesanyunauthorizedactinrelationtothispublication maybeliabletocriminalprosecutionandcivilclaimsfordamages. Theauthorshaveassertedtheirrightstobeidentifiedastheauthorsof thisworkinaccordancewiththeCopyright,DesignsandPatentsAct1988. Firstpublished2009by PALGRAVEMACMILLAN PalgraveMacmillanintheUKisanimprintofMacmillanPublishersLimited, registeredinEngland,companynumber785998,ofHoundmills,Basingstoke, HampshireRG216XS. PalgraveMacmillanintheUSisadivisionofStMartin’sPressLLC, 175FifthAvenue,NewYork,NY10010. PalgraveMacmillanistheglobalacademicimprintoftheabovecompanies andhascompaniesandrepresentativesthroughouttheworld. Palgrave®andMacmillan®areregisteredtrademarksintheUnitedStates, theUnitedKingdom,Europeandothercountries ISBN 978-1-349-58563-2 ISBN 978-0-230-28212-4 (eBook) DOI 10.1007/978-0-230-28212-4 Thisbookisprintedonpapersuitableforrecyclingandmadefromfully managedandsustainedforestsources.Logging,pulpingandmanufacturing processesareexpectedtoconformtotheenvironmentalregulationsofthe countryoforigin. AcataloguerecordforthisbookisavailablefromtheBritishLibrary. AcatalogrecordforthisbookisavailablefromtheLibraryofCongress. 10 9 8 7 6 5 4 3 2 1 18 17 16 15 14 13 12 11 10 09 Transferred to Digital Printing in 2010 Contents ListofFigures x ListofTables xi NotesontheContributors xiii Foreword xv Preface xvii Acknowledgements xix Introduction 1 1 SurveyofModelsandIndicatorsofIndependence 6 Introduction 6 Baseindicatorsofindependence 7 Firstindicatorofdejureindependence: BadeandParkin(1977) 8 Alesina’spoliticalresponse(1988,1989) 10 Grilli,Masciandaro,andTabellini(1991) 12 Twoofthemostwidelyusedindicators:Cukierman(1992) 16 Aggregationoftwolegalmeasures:Alesinaand Summers(1993) 18 Anewlegalindicator:EijffingerandSchaling(1993) 20 Politicalvulnerabilityofcentralbanks: CukiermanandWebb(1995) 20 Subsequentliteratureandempiricalstudiesonbaseindicators 25 Theoreticalandempiricalclarificationson centralbankindependence 25 Endogenizingtheinflationbias 29 Robustnessofindependencemeasures 32 Causalityofhypothesesoncentralbankindependence 35 Robustnessandsensitivityofresults, andsearchfornewmeasures 41 Independence,credibility,andcostsofdeflation 51 Conclusions 59 Appendices: 63 I. VariablesinCukierman’sLVAU-LVAWindices 63 II. VariablesinCukierman’sQVAU-QVAW 67 v vi Contents III. Summaryofbaseindicatorsofdejureindependence 69 IV. Summaryofbaseindicatorsofdefactoindependence 77 V. Summaryofempiricalstudiesondejureindependence 81 VI. Summaryofempiricalstudiesondefactoindependence 88 2 SurveyofModelsandIndicatorsofAccountability 90 Responsibilityandaccountability 90 Responsibility 91 Accountability 91 Theconceptofaccountabilityintheliterature 93 Briault,Haldane,andKing(1996):dejureand defactoaccountability 93 Bini-SmaghiandGros(2000):exanteandexpost accountability 94 deHaan,Amtenbrink,andEijffinger(1998): threemainfeatures 95 Castellani(2002) 97 Siklos(2002) 97 Timeinconsistencyandaccountability 98 Delegatingmonetarypolicytoanindependent centralbank 98 Override 98 Contractualsolution 99 Indicatorsandmeasuresofaccountability 99 Briault,Haldane,andKing(1996) 99 deHaan,Amtenbrink,andEijffinger(1998) 100 Bini-SmaghiandGros(2000and2001) 102 Stasavage(2003) 104 Siklos(2002) 104 Accountabilityindices:comparisonofempiricalresults 105 3 SurveyofModelsandIndicatorsofTransparency 107 Introduction 107 Rationalesfortransparency 108 Boostcentralbankcredibility 108 Influenceexpectations 108 Protectcentralbankindependence 109 Strengthentheunderstandingofmonetarypolicy 109 Reduceinformationalasymmetriesanduncertaintyin financialmarkets 110 Enhancemarketefficiency 111 Contents vii Eliminategovernmentuncertaintyonthe performanceofmonetarypolicy 111 Enhancefiscalandmonetarypolicycoordination 111 Theconceptoftransparencyintheliterature 111 Transparencyandaccountability 111 Characteristicsoftransparency 112 Aspectsoftransparencyinthepolicy-makingprocess 114 Indicatorsandmeasuresintheliterature 116 Generalobservations 116 Siklos(2002) 117 EijffingerandGeraats(2004) 117 Stasavage(2003) 118 deHaanandAmtenbrink(2003) 120 Comparisonbetweenmeasures 121 Conclusions 122 4 IndicatorsofIndependence,Accountability, andTransparency 124 Methodologyforassessingcentralbankindependence 124 Generalconsiderations 124 TheGMT(1991)index 124 TheCukierman(1992)index 126 Assessmentprocedureandsampling 127 Methodologyforassessingcentralbankaccountability andtransparency 127 Generalconsiderations 132 Detailedindexofaccountability 136 Detailedindexoftransparency 145 5 GlobalTrendsinCentralBankGovernance 151 Globaltrendsincentralbankindependence 151 Centralbankindependenceinthelate1980s 152 Centralbankindependenceasofend-2003 152 Developmentsincentralbankindependenceovertime 159 Globaltrendsincentralbankaccountabilityandtransparency 163 Accountabilityscores 163 Transparencyscores 167 Relationshipsbetweenindependence,accountability, andtransparency 170 Accountabilityandtransparency 170 Accountabilityandindependence 173 viii Contents Transparencyandindependence 175 Additionalconsiderations 178 Conclusions 178 Globaltrendsincentralbankgovernance 179 Trendsbystagesofeconomicdevelopmentandregions 179 Relativedeficitofaccountability 179 Relativedeficitoftransparency 182 Appendices: 187 I. Independence:countrysample 187 II. Independence:politicalscoresforadvanced economies(2003) 190 III. Independence:politicalscoresforemerging markets(2003) 192 IV. Independence:politicalscoresfordeveloping countries(2003) 194 V. Independence:economicscoresforadvanced economies(2003) 198 VI. Independence:economicscoresforemergingmarkets (2003) 200 VII. Independence:economicscoresfordeveloping countries(2003) 202 VIII. Independence:evolutionforGMTsample (late1980s–2003) 206 IX. Independence:evolutionforCukiermansample (late1980s–2003) 208 X. Independence:summaryindices(late1980s–2003) 213 XI. Accountabilitydatabase(2006) 220 XII. Transparencydatabase(2006) 224 XIII. Detailedgovernancescores 228 6 IndependenceandInflationPerformance: NewEmpiricalEvidence 232 7 PolicyLessonsfromGlobalTrends 237 Overview 237 Relationshipsbetweenthepillarsofcentralbankgovernance 238 Consensusviews 241 Principle1:setpricestabilityasoneoftheprimary objectivesofmonetarypolicy 242 Principle2:curtaildirectlendingtogovernments 242 Contents ix Principle3:ensurefullindependenceforsettingthe policyrate 243 Principle4:ensurenogovernmentinvolvementin policyformulation 243 Principle5:ensurethataccountabilitycorrespondsto thelevelofindependence 244 Principle6:ensurethattransparencycorrespondsto thelevelofaccountabilityandfinancialmarket deepening 244 Roleofcentralbanksinfinancialsupervision 245 Theoreticalconsiderations 245 Surveyofpractices 247 Thewayforward 249 Sequencingofreforms 251 Stage1:clarifyobjectivesandestablishbasic instrumentindependence 252 Stage2:establishthebuildingblockofaccountability 254 Stage3:strengthenfurtherpoliticalindependence, accountability,andtransparency 255 References 256 Index 264

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