Monday, March 15, 2010

Central Bank Reform

I just got back from the annual Public Choice meeting (held in beautiful Monterey, CA). While there, I had the pleasure of discussing Sven-Olov Daunfeldt's paper on central bank reform. Here's the abstract:
This paper is a first empirical attempt to investigate why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to fine-tune the economy. A new data-set covering 132 countries, of which 89 countries had implemented such reforms, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country has been characterized by a high variability in historical inflation and if they faced a high probability of being replaced. No such effects were found for OECD-countries.
You can find the full version here.