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The Development of Central Bank Independence: Empirical Evidence
Höfer, Andreas | Jaenke, Katrin
Credit and Capital Markets – Kredit und Kapital, Vol. 56 (2023), Iss. 2 : pp. 123–144
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Prof. Dr. Andreas Höfer, Deutsche Bundesbank University of Applied Sciences, Schloss, 57627 Hachenburg, Germany.
Katrin Jaenke, Deutsche Bundesbank.
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Abstract
In the academic literature there are different indices to quantify the independence of Central Banks. The main indices to measure Central Bank Independence (CBI) were published between 1970 and 1990. This paper applies CBI indices to a sample of 15 industrial countries and the European Central Bank (ECB) to the current legal conditions. Hence, we are able to study the development of CBI and how it is related with change of inflation. Overall, we find that CBI has increased over the last decades. However, the original approaches to determine CBI do not consider the unconventional monetary policy (Quantitative Easing (QE)) that has been practised by Central Banks in recent years. Considering QE leads to lower CBI scores which are still higher than the original scores that were determined in the 1970’s–1990’s.