CENTRAL BANKS‘ INDEPENDENCE: INSTITUTIONAL DETERMINANTS, RANKINGS and CENTRAL BANKERS’ VIEWS
| Published date | 01 November 1994 |
| Author | Franco Spinelli,Donato Masciandaro |
| DOI | http://doi.org/10.1111/j.1467-9485.1994.tb01137.x |
| Date | 01 November 1994 |
Srorrish
Journal
of
Poliriml
Economy,
VoI.
41.
No.
4.
November
1994
@
Scottish Economic Society
1994.
Published by Blackwell Publishers,
108
Corley Road. Oxford
OX4
IJF. UK
and
238
Main
Slreet. Cambridge,
MA
02142.
USA
CENTRAL BANKS’ INDEPENDENCE:
INSTITUTIONAL DETERMINANTS, RANKINGS
AND CENTRAL BANKERS’ VIEWS
Donato Masciandaro
*
and Franco Spinelli**
I INTRODUCTION
For years economists have analysed the optimal conduct of monetary policy
within a theoretical framework
a
la Poole (1970) where what matters are just
the stochastic nature of the world and the theoretical views of the central
banker. Subsequently, and thanks to the seminal works of Kydland and
Prescott (1977), Fair (1980), Bade and Parkin (1985) and Baniainan, Laney and
Willet (1993). the analyses began to also take into consideration the institu-
tional constraints which central banks are faced with. This has led to dis-
cussions of the consequences of such constraints on the degree of independence
of
central banks and, therefore, on their capacity to contrast the ever present
government’s inflation bias; by this route, analyses of monetary theory and
monetary policy have come very close to monetary constitutionalism.
Because the new literature, which certainly succeeded in showing that the
institutional constraints on central banks’ behaviour matter a lot in theory and
practice, has grown very fast, one feels that there is now a need for:
(i) a detailed listing and an appropriate grouping of the many constraints
which have been considered
so
far by various students;
(ii)
a ranking of all the central banks of the
OECD
countries according to the
constraints they face and their consequent degrees of independence of
governments;
(iii) an inquiry into the relevance that central bankers themselves attach to the
constraints that have
so
far been taken into consideration by the
economists.
The aim of this note is to start filling out these gaps. In Section
I1
we briefly
draw the reader’s attention to the growing literature on the relationship
between central bank independence and monetary theory and policy; in Section
111,
first we list the constraints that have been considered in that literature and,
subsequently, we group them into two broad categories which define the
degrees of ‘political’ and ‘functional’ independence of a central bank; in
Bocconi University, Milan
State University, Brescia
.*
434
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