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Central Bank Independence in the World: A New Data Set

Abstract and Figures

This article introduces the most comprehensive dataset on de jure central bank independence (CBI), including yearly data from 182 countries between 1970 and 2012. The dataset identifies statutory reforms affecting CBI, their direction, and the attributes necessary to build the Cukierman, Webb and Neyapty index. Previous datasets focused on developed countries, and included non-representative samples of developing countries. This dataset’s substantially broader coverage has important implications. First, it challenges the conventional wisdom about central bank reforms in the world, revealing CBI increases and restrictions in decades and regions previously considered barely affected by reforms. Second, the inclusion almost 100 countries usually overlooked in previous studies suggests that sample selection may have substantially affected results. Simple analyses show that the associations between CBI and inflation, unemployment or growth are very sensitive to sample selection. Finally, the dataset identifies numerous CBI decreases (restrictions), whereas previous datasets mostly look at CBI increases. These data’s coverage not only allows researchers to test competing explanations of the determinants and effects of CBI in a global sample, but it also provides a useful instrument for cross-national studies in diverse fields, such as liberalization, diffusion, political institutions, democratization, or responses to financial crises.
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Central Bank Independence in the World.
A New Dataset
Ana Carolina Garriga
Forthcoming in International Interactions
This article introduces the most comprehensive dataset on de jure central bank independence
(CBI), including yearly data from 182 countries between 1970 and 2012. The dataset
identifies statutory reforms affecting CBI, their direction, and the attributes necessary to build the
Cukierman, Webb and Neyapty index. Previous datasets focused on developed countries, and
included non-representative samples of developing countries. This dataset’s substantially broader
coverage has important implications. First, it challenges the conventional wisdom about central
bank reforms in the world, revealing CBI increases and restrictions in decades and regions
previously considered barely affected by reforms. Second, the inclusion almost 100 countries
usually overlooked in previous studies suggests that sample selection may have substantially
affected results. Simple analyses show that the associations between CBI and inflation,
unemployment or growth are very sensitive to sample selection. Finally, the dataset identifies
numerous CBI decreases (restrictions), whereas previous datasets mostly look at CBI increases.
These data’s coverage not only allows researchers to test competing explanations of the
determinants and effects of CBI in a global sample, but it also provides a useful instrument for
cross-national studies in diverse fields, such as liberalization, diffusion, political institutions,
democratization, or responses to financial crises.
Keywords: Central banks, central bank independence, datasets, measurement,
Ana Carolina Garriga
Centro de Investigación y Docencia Económicas (CIDE)
División de Estudios Políticos
Carretera México-Toluca 3655
Lomas de Santa Fe, México DF 01210, MEXICO
Phone: (+52 55) 5727-9800 Ext. 2165
This article introduces the most comprehensive dataset on de jure central bank
independence (CBI) available to the date. The dataset identifies statutory reforms
affecting CBI, their direction, and the attributes necessary to build the Cukierman, Webb
and Neyapty (1992) (CWN) index in 182 countries between 1970 and 2012. The most
commonly-used datasets include fewer than 100 countries, and cover fewer years. This
dataset codes the existence of reforms in 6,764 observations, and computes the CWN
index for 5,866 observations.1 The data coverage not only allows researchers to test
competing explanations on the determinants and effects of CBI in both developed and
developing countries, but it also provides a useful instrument for cross-national studies in
diverse fields. CBI has been a variable of interest not only for studies of the determinants
and effects of monetary policy, liberalization, or diffusion, but also for the study of
political institutions, democratization, or responses to crises (Adam, Delis, and Kammas
2011, Reenock, Staton, and Radean 2013, Rosas 2006). This article shows that previous
data provide incorrect or incomplete conclusions about the dynamics of central bank
reform in the world. For example, analysis of global data refutes “the fact that during the
forty years ending in 1989 there had hardly been reforms in [central bank] legislation”
(Cukierman 2008:724) . Finally, simple regressions show that associations between CBI
and inflation, unemployment and growth are very sensitive to the sample used. Sample
selection may have affected the generalizability of previous results in a significant manner.
CBI is the central bank’s capability of controlling monetary instruments
(Bernhard 2002:21) or, inversely, CBI is the set of restrictions to the government’s
1 The largest publically available original dataset (Bodea and Hicks 2015b)
includes only 2,314 observations (34.2% of this sample). The largest compilation of
datasets, including own coding (Sadeh 2011), has 2,714 observations (40% of this
influence on the central bank management of monetary policy. CBI can be restricted or
increased on three dimensions: personnel, financial, and policy independence (Eijffinger
and de Haan 1996:2). Personnel independence reflects limits to the government’s
influence on the central bank board’s membership or tenure. Financial independence
restricts the government’s ability to use central bank’s loans to fund its expenditures, to
avoid monetary policy subordination to fiscal policy. Finally, policy independence
reflects the central bank’s powers to formulate and execute monetary policy. This
includes the central bank’s ability to set the goals and/or chose the instruments of
monetary policy (Debelle and Fischer 1995). Central banks’ institutional designs vary
across these dimensions, resulting in different levels of CBI. However, providing a
continuous measure for CBI with cross-sectional and temporal validity and a broad
coverage has proven to be a difficult task.
In the 1980s, CBI emerged as the recipe to avoid the pervasive inflationary
consequences of shortsighted electoral ambitions. The practical advice derived from the
“rules versus discretion” literature (Barro and Gordon 1983, Rogoff 1985) was to solve
the time-inconsistency problem (Kydland and Prescott 1977) by delegating the control of
monetary policy to independent central banks. International agencies and policy makers
embraced this advice (Bernhard, Broz, and Clark 2002:699, International Monetary Fund
1999, World Bank 1992).
The need to test the theoretical argument, and assess the consequences of
delegation to central banks, spurred the interest in measuring CBI. Many studies show
the stabilizing effects of CBI on the economy: CBI is linked to lower inflation, reduced
variation in inflation and output, increased credibility of the monetary policy, and lower
uncertainty among economic agents (Bodea and Hicks 2015a, Cukierman 1992,
Cukierman, Miller, and Neyapti 2002, Cukierman, Webb, and Neyapti 1992, Persson and
Tabellini 1990, Rogoff 1985). The literature also shows that CBI has important political
consequences (Bernhard and Leblang 2002, Clark, Golder, and Poast 2013).
Beyond the consequences of CBI, researchers in the fields of international and
comparative political economy (Bernhard 2002, Broz 2002, Clark 2002, Hallerberg 2002),
and those interested in the politics of delegation (Bendor, Glazer, and Hammond 2001),
reforms (Acemoglu, Johnson, Querubin, and Robinson 2008), and diffusion (Polillo and
Guillén 2005) have paid particular attention to the determinants of CBI. Although
economic reasons would justify the establishment of independent central banks, the
variance CBI across countries is not explained just by economic fundamentals. However,
the few studies on the determinants of CBI have limitations. Most of these works show
the determinants of CBI in developed countries (Bernhard 2002, Broz 2002, Clark 2002,
Pistoresi, Salsano, and Ferrari 2011). Although there is agreement regarding the
possibility that the determinants of CBI are different in developed and developing
countries, data seldom allow us to test competing explanations on both sets of countries.
Studies including developed and developing countries are either cross-sectional analyses
(Crowe and Meade 2007) or are based on not-necessarily representative samples
(Berggren, Daunfeldt, and Hellström 2014, Bodea and Hicks 2015b).
Limited data availability suggests limits to our knowledge on these matters.2
Because the countries included in previous datasets are not representative world or
regional samples, it is possible that results on global samples are biased. And additional
2 Siklos (2008:803) suggests that data problems may even affect the definition of
CBI because empirical studies usually define CBI “sufficiently loosely […] to fit the
particular needs of the group of countries under investigation.” He attributes this to “the
inevitable constraints imposed by the availability of limited data as well as variations in
the quality of the data across countries.”
problem is that most previous data coding efforts focused on legislation that was in force
in certain years, providing valuable cross-sectional information, but little insight on
variation within countries.
To solve these issues, one needs to collect legislation from most countries in the
world, including legislation that has been revoked, and partial reforms affecting CBI. The
sources are not centralized,3 and include primary and secondary legislation, and central
banks’ internal rules. Furthermore, lack of translations for legislation in countries where
English is not the official language poses additional challenges.
Measuring CBI
Most empirical studies using CBI as dependent or independent variable base their
measures of CBI on central banks statutes (de jure CBI) (Alesina, Mirrlees, and Neumann
1989, Cukierman 1992, Grilli, Masciandaro, and Tabellini 1991). Some scholars have
used measures of de facto CBI, based on questionnaires (Blinder 2000, Cukierman, et al.
1992, Fry, Goodhart, and Almeida 1996) or in the turnover rate (TOR) of central bankers
(Cukierman and Webb 1995, Cukierman, et al. 1992, de Haan and Siermann 1996).
However, questionnaires may not be the most reliable measure of CBI, particularly
because of their narrow coverage, their problematic cross-sectional comparability, and
their little within-country variation. Furthermore, although Cukierman and others found
the TOR predicts inflation in developing countries, Dreher, Sturm, and de Haan (2008)
show that endogeneity explains this finding: central bankers unable to control inflation
are replaced more often.
3 The IMF’s Central Bank Legislation Database (CBLD) is restricted to central
banks and IMF personnel. Access to this data may help completing or contrasting the
sources used for this codification.
Measures based on statutes have been criticized because laws do not contemplate
all contingencies that might affect the relations between the central bank and the
government. Furthermore, deviations from the law are not infrequent. Even
independent central banks can be influenced by the government’s appointments and
threats to the bank’s independence (Lohmann 1998). Siklos (2008:804), on the other
hand, regrets that the literature on CBI “has downplayed to an excessive degree the
importance of the design of central bank legislation.” In spite of criticisms, reliance on a
legal-based measure is useful for several reasons. First, a measure of statutory CBI allows
collecting comparable cross-sectional data across time. These data allows looking for
systematic differences across observations. Second, and more importantly, the utility of
the measure depends on the research question for which it is used: statutory measures of
CBI are useful to assess governments’ institutional choices, that is, when and to what
extent governments give independence to their central banks – or limit it.
Although there are differences among different scores of de jure CBI (Alesina, et
al. 1989, Cukierman 1992, Grilli, et al. 1991), their correlation with inflation variables is
comparable. I use Cukierman, Webb, and Neyapti’s (CWN) criteria instead of other
available measures of CBI (Alesina, et al. 1989, Grilli, et al. 1991) for several reasons:
First, CWN’s criteria for coding are clear and easily replicable. Second, CWN’s
component variables are exhaustive and allow further recodifications for other purposes,4
and allow the study of particular components of the index (Banaian, Burdekin, and
Willett 1998. Furthermore, it has been widely used “the current state of the art of
measurement of de jure CBI” (Acemoglu, et al. 2008:20) – , and its larger cross-sectional
and historical coverage allowed me to check the reliability of my own coding.
4 Arnone et al. (2007:39-40) include a table to convert CWN scores to the Grilli,
Masciandaro, and Tabellini (1991) scale.
Other scholars have extended CWN’s original coding of up to 72 countries
between 1950 and 1989 (on a country-decade basis), and up to 26 post-communist
countries for 1991-1998. For example, Polillo and Guillén (2005) extend this index to the
period 1990-2000 for 71 countries, Crowe and Meade coded 76 countries in 2003, Sadeh
combined extant sources and his own coding to cover 93 countries between 1968 and
2005, and Bodea and Hicks (2015b) coded CBI for 81 countries between 1972 and 2008.
Although the literature reports results based on other datasets, they are not all publicly
available (Daunfeldt, Hellström, and Landström 2013, Wessels 2006). For a list of
countries and observations included in publicly available datasets, see online appendix.
The Dataset
Coding Process and Descriptive Information
The dataset codes central bank legislation in 182 countries.5 I coded over 840
documents constitutions, laws, amendments, and decrees that directly refer to central
banks, and central bank charters (see online appendix). Legislation was collected mainly
from online sources, and it was coded for all countries that had available texts in English,
Spanish, French, Portuguese or Italian. This helped identifying legislation that may have
been overlooked in other datasets.6
5 I obtained primary sources for 179 countries. I did not find primary sources to
code the CWN components for three countries. However, I found reliable secondary
sources to code the existence of reforms.
6 I coded 100 documents in Spanish, 47 in French, 34 in Portuguese, and 7 in
Italian. For Suriname’s and Turkmenistan’s legislation, I used automated translations.
Legislation was collected and coded in four independent processes: (1) I compiled
and coded all the sample for the period 1970-2008 in 2009; (2) one research assistant
(RA) compiled and two RAs coded the period 2009-2011 during 2012, and (3) one RA
compiled and two RAs coded the period 1970-2012 in 2013-2014 as a reliability check on
the coding of overlapping years. In the first two rounds, I relied on central banks’
websites and search engines to find legislation and news about central bank reforms. The
third round of data collection included “targeted searches”: to find earlier reforms, I
searched for older laws mentioned in new laws, and used national legislatures’ search
engines and central banks’ official information services to find them by their number
and/or date. This let me find reforms previously omitted. In the third wave, 15% of the
laws coded by each of the RAs were recoded by the other RA, and we held weekly
meetings to discuss differences between the coders and to agree about criteria. This third
wave of coding produced a second score for each variable for the period that overlapped
the previous two waves (1970-2011). (4) In the final stage, I compared both scores for
each country-year. If I found a discrepancy, I went back to the laws to re-evaluate them,
and decided the appropriate coding.
The dataset relies on Cukierman (1992) and Cukierman, Webb and Neyapti’s
(1992) rules to code central bank legislation. Each piece of legislation was coded on 16
dimensions related to four components of CBI, on a country-year basis: CEO’s
characteristics (appointment, dismissal, and term of office of the chief executive officer
of the bank); policy formulation attributions (who formulates and has the final decision in
monetary policy, and the role of the central bank in the budget process); central bank’s
objectives; and central bank’s limitations on lending to the public sector. These 16
components are also combined into a single weighted index, ranging from 0 (lowest) to 1
(highest) CBI. I also computed the CWN unweighted index. See the online appendix for
coding and weighting rules.
If reforms were partial amendments, only the variables affected by the
amendments were recoded. If reforms did not affect CBI, they were not coded as
reforms. When legislation was not available, variables included in the CWN index were
not coded. However, if the central bank explained in its own institutional information
(or official “history”) that there was an institutional reform in a given year, and the
information clearly allowed me to determine that reform’s direction, I coded those
The dataset includes additional variables: central bank creation, a central bank
reform that affects CBI in a given year, its direction (CBI increase or decrease), and
whether the central bank is a regional entity. The dataset includes 6,764 observations for
central bank reforms, and identifies 382 reforms affecting CBI.7 Of those reforms, 276
increase CBI, 56 decrease CBI, 39 have a zero net-effect on CWN’s weighted index.8 In
11 reforms, direction was not coded. It also includes 5,866 observations with scores for
the CWN legal index of CBI.
This dataset differs from previous datasets in three aspects: First, its coverage is
significantly broader (290% larger) than the largest original publicly available dataset
(Bodea and Hicks 2015b).9 Second, I include variables that account for the existence of
central bank reforms and their direction, even when there is no information on the
specific dimensions of CBI that were reformed. Although these categorical variables do
not provide information on the magnitude of the reform, some studies can still benefit
7 Although the Panamanian National Bank’s is not strictly a central bank, other
authors consider it possible to use its legislation to code its independence.
8 See below.
9 When regional observations are excluded, the dataset is 253% larger than Bodea
and Hicks (2015b), and 270% larger than Sadeh (2011).
from accounting for the existence and direction of reforms. Third, I identify numerous
reforms omitted in previous datasets, including reforms restricting CBI, a possibility not
even discussed in the literature until now. This within-country variation also permits
controlling for CBI in models with fixed effects. Finally, two additional variables register
whether the central bank was created in a given year, and whether the country’s monetary
policy is in the hands of a regional monetary union (for example, the members of the
Central Bank of West African States).
The online appendix shows descriptive statistics for this dataset and other
available datasets (Bodea and Hicks 2015b, Crowe and Meade 2007, Cukierman, et al.
1992, Neyapti and Dinçer 2008, Polillo and Guillén 2005, Sadeh 2011), for comparison
purposes. Differences in the CWN indices’ sample means are misleading because the
samples vary. The correlation between this and the other five datasets ranges between .7
(Sadeh) and .92 (CWN). (See the correlation matrix in the online appendix.) This reflects
a substantial consistency in the coding criteria of overlapping observations. Differences
in coding often result from omitted reforms or coding of the year of the reforms in other
A caveat on regional central banks: 933 observations correspond to countries that
are members of regional central banks (such as European Central Bank or the Banque
des États de l'Afrique Centrale). However, only 391 of the 2,799 country-year
observations that appear exclusively in this dataset correspond to regional central banks –
other datasets also include regional observations, but do not single them out. In order to
avoid distortions caused by the inclusion of data on regional central banks, the online
appendix reproduces all the tables and graphs presented in this article excluding regional
observations. The results are substantially similar to the results reported in the article.
Geographic Coverage
The broad sample is one of this dataset’s most important attributes. It codes 105
countries for the full period. In subsequent years, new countries and countries whose
legislation became available were added (see Figure 1).
Figure 1. Number of countries per year included in the different datasets
This dataset not only includes a substantial number of countries previously
omitted, but also presents a more accurate picture of regional differences. Previously
available data are not representative world or regional samples, imposing limits to the
generalizability of previous studies. Figure 2 illustrates how the new dataset more
accurately represents important groups of countries. The top panel shows that this
050 100 150 200
Number of countries
1970 1980 1990 2000 2010
Garriga CWN Polillo&Guillen
Sadeh Bodea&Hicks
dataset greatly improves the representation of middle and lower income countries. The
bottom panel further shows countries in regions other than North America and Europe
were seriously underrepresented.
Figure 2: Countries included in different datasets, by income groups and geographic
Frequent Central Bank Reforms Around the World, and in Both Directions
The identification a number of reforms previously ignored is another important
contributions. The larger number of reforms in my dataset is not due to a broader
conceptualization of “reform.” It results from coding legislation that previous
Number of countries
High income Upper middle income Lower middle income Low income
Garriga CWN Polillo&Guillen Sadeh Bodea&Hicks
Number of countries
E.Europe & post-sov
W.Europe & N.America
Latin Am. & Caribbean
Sub-Saharan Africa
N. Africa & Middle East
The Pacific
researchers apparently overlooked, and from including additional countries (see Figure 3,
top panel). 5.6% of the 6,764 observations experience reforms affecting CBI. The mean
number of reforms per country in this dataset is two in 43 years.10
Figure 3: Number of reforms affecting CBI per year. Newly coded and previously coded
countries (top panel), reforms by direction (bottom panel)
10 The online appendix shows the frequency of reforms per country and year.
0 5 10 15 20
Number of reforms
Previously coded countries New countries
0 5 10 15 20
Number of reforms
CBI_decreases CBI_increases CBI_other
This dataset raises questions about the conventional wisdom regarding the history
of CBI reforms. Scholars argue that most reforms occurred in the 1990s (see Fernández-
Albertos 2015), stressing the fact that during the forty years ending in 1989 there had hardly
been reforms in [central bank] legislation” (Cukierman 2008:724, emphasis added).
Examining a more representative global sample casts doubt upon this assertion: this
dataset identifies 113 reforms between 1970 and 1989 (75 of them increase CBI), usually
ignored in the literature.11 On average, in the 1970s 5.3% of the sample experienced
reforms affecting CBI. The percentage of observations coded as reforms is 3.2% for the
1980s, 7.9% for the 1990s, 5.5% for the 2000s, and 5.9% for the first three years of the
2010s.12 This contrasts with other data, as shown in Figure 4.13 This picture is similar in
the light of the number of countries included in different samples (Figure 6.1 in the
online appendix plots the proportion of observations included coded as experiencing CBI
reforms by year in different datasets).
11 In the same two decades, Bodea and Hicks identify 17 reforms (nine of them
increasing CBI). 84 of the 113 reforms I identify are in newly coded countries, and 29 in
countries that were coded by Bodea and Hicks.
12 The magnitude of the reforms also varies through the sample. In absolute
terms, the average reform changes the index by .112 before 1989, and by .206 after that
year. In relative terms, the average percentage change in CBI before 1989 is 40%
(excluding Iran, a significant outlier), and 63%, between 1990 and 2012.
13 Daunfeldt, et al. (2013) coded central bank reforms in a sample of 132
countries between 1980-2005. Their data is not public, so these data comes from their
figure 1 (Daunfeldt, et al. 2013:431).
Figure 4: Number of reforms affecting CBI per year. Different datasets
This dataset thoroughly identifies not only numerous reforms, but also their
direction (see Figure 3, bottom panel). In particular, it identifies 56 reforms restricting
CBI, a movement not discussed by the literature possibly because it was considered an
exceptional event. Table 1 compares the number and direction of reforms identified by
three datasets. I also code 39 instances in which reforms to different aspects of CBI do
not affect the scores based on the CWN index, or the direction of different amendments
offset each other (as in Slovenia 2007). In other eleven cases, missing data on the
regulation before the reform does not allow me to code with certitude the reform’s
direction; therefore, direction is missing.
0 5 10 15 20
Number of reforms
1970 1980 1990 2000 2010
Garriga Polillo&Guillen
0 5 10 15 20
Number of reforms
1970 1980 1990 2000 2010
Garriga Bodea&Hicks
0 5 10 15 20
Number of reforms
1970 1980 1990 2000 2010
Garriga Daunfeldt&al
Table 1: CBI reforms, by direction
Number of countries
Number of reforms
Total (%)
Reforms increasing CBI (%)
Reforms decreasing CBI (%)
Zero effect or no direction coded (%)
382 (100%)
276 (72.2%)
56 (14.7%)
50 (13.1%)
58 (100%)
57 (98%)
1 (2%)
113 (100%)
95 (84%)
18 (16%)
CBI in the World: A Different Picture?
This dataset shows that the global dynamics towards CBI may have been
overstated as an artifact of sample selection. This section suggests that this picture is
mainly a product of the overrepresentation of higher-income and post-communist
countries in the samples.
The high correlation of my coding with other datasets suggests that coding
criteria were consistent. However, sample selection has significant effects on our
understanding of CBI. The first difference refers to the worldwide levels of CBI (see
Figure 5, top panel). It is a common practice to compare the CWN data world average
for 1989 and Crowe and Meade’s from 2003 (Crowe and Meade 2007, Fernández-
Albertos 2015). This suggests an 80% increase in the global level of CBI between 1989
and 2003. However, the global effect of central bank reforms seems less dramatic on
samples including more countries, especially because the previously excluded countries
show less variance in CBI (see Figure 5, middle panel). Bodea and Hicks register a 67%
increase, but this article’s dataset shows a more modest 40% increase in the world average
CBI between 1989 and 2003.
Figure 5. CBI world average. Different datasets (top panel), different subsamples
(middle panel), and by income groups (bottom panel)
.3 .4 .5 .6 .7
CBI World Average
1970 1980 1990 2000 2010
Yea r
Garriga CWN Polillo&Guillen Sadeh Bodea&Hicks Crowe&Meade
.3 .4 .5 .6 .7
CBI World Average
1970 1980 1990 2000 2010
Yea r
Garriga (full dataset) Garriga (new data) Garriga (recoded data) Bodea&Hicks
.3 .4 .5 .6 .7
CBI Group Average
1970 1980 1990 2000 2010
Yea r
High income Upper middle income Lower middle income Low income
The bottom panel in Figure 5 shows that this misleading picture was mainly
driven by the central bank reforms in higher-income countries, which are
overrepresented in other samples. However, lower-middle income and low-income
countries had more stable levels of CBI through the period. This also contrasts with the
assertion that “central banks in emerging market and developing economies have seen an
even more impressive shift towards independence over the past two decades than their
advanced-economy counterparts” (Crowe and Meade 2007:73, emphasis added).
Although that is certainly the case for Eastern European and post-Soviet countries, it is
not an accurate description of CBI in most developing countries (see Figure 6).
Figure 6. CBI regional averages
.2 .4 .6 .8
CBI group Average
1970 1980 1990 2000 2010
E. Europe and post Soviet
W. Europe and N. America
.2 .4 .6 .8
1970 1980 1990 2000 2010
East Asia S&SE. Asia
Latin Am. & Caribbean
.2 .4 .6 .8
CBI group Average
1970 1980 1990 2000 2010
N. Africa & Middle East The Pacific
Sub-Saharan Africa
This dataset unveils important regional dynamics. During the period covered by
this dataset the most dramatic increase in CBI occurred among post-communist countries
in the 1990s until the mid-2000s, followed by Western European countries. These
countries rarely had CBI reversals. Latin American and Asian countries also increased
their CBI, but gradually, through a much longer period. Also, Latin American countries
restricted CBI seven times during the 2000s. Finally, the dynamics were very different in
Africa and the Pacific: these countries’ CBI average was similar to Western Europe’s in
the 1970s, but did not change substantially throughout four decades. This new
information casts doubt upon statements like most central banks in today’s world enjoy
substantially higher levels of […] legal […] independence that twenty years ago or earlier”
(Cukierman 2008:723, emphasis added).
The components of CBI
The CWN criteria permit the analysis of different components or dimensions of
CBI, which show distinctive patterns. Figure 7 plots world averages of the CWN
composite indices, and of their four components (see online appendix for variables
included in each component). This figure shows a general tendency to convergence
among the four components of the CWN index. Also, the data suggests that the
weighting rules to combine the components do not alter significantly the index. Figure 8
plots the yearly average of the components, by income group.
Figure 7. CBI indices and their components. World averages
Figure 8. CBI components, income group averages
.3 .4 .5 .6
World Average
1970 1980 1990 2000 2010
Weighted index Unweighted index Personnel indep.
Policy indep. CB objectives Financial indep.
.2 .3 .4 .5 .6 .7
Group ave.
1970 1980 1990 2000 2010
Financial indep.
.2 .3 .4 .5 .6 .7
1970 1980 1990 2000 2010
Policy indep.
.2 .3 .4 .5 .6 .7
1970 1980 1990 2000 2010
Low income Lower middle income
Upper middle income High income
Personnel indep.
.2 .3 .4 .5 .6 .7
1970 1980 1990 2000 2010
CB objectives
Regarding the main components of the CWN measure, personnel independence
(CEO variables) has been the most stable throughout the sample and subsamples
consistent with Crowe and Meade’s (2008) account. Financial independence (the ability
of the government to use central bank credit to finance itself) exhibits the most dramatic
changes through time. However, this dynamic particularly characterizes reforms in
higher-income countries. Central banks in lower-income countries gained relatively more
independence in policy matters and from the redefinition of the bank’s objectives.
Finally, the variables reflecting central banks’ policy independence show the largest
variance depending on the income-groups (see upper-right panel in figure 11).
Simple Tests: CBI, Inflation, Unemployment, and Growth
Table 2 shows the results of regressing inflation, unemployment and GDP
growth on their lagged values and on CBI (with fixed effects). These models do not
intend to test whether CBI has a causal effect on those variables, but to show the
potentially important effects of sample selection (and in some cases, of measurement) on
the association between CBI and variables of interest.
When inflation is regressed on CBI in the full sample, the coefficient is negative
and highly statistically significant. I obtain similar results if the sample is divided between
high-income and middle- and lower income countries.14 Although these are very simple
models, the fact that in a larger sample I find a negative relationship between CBI and
inflation for both developed and developing countries is noteworthy – and contrasts with
previous findings (see Arnone et al. 2007, Bodea and Hicks 2015:40). The relationship
between CBI and inflation is very sensitive to the sample. When the same model is run
14 The substantive magnitude of the coefficient is larger in the middle- and lower-
income countries.
on the CWN sample, there is no statistically significant relation between inflation and
CBI – either with CWN’s measure or my measure of CBI. I run the same model on two
additional samples: Using Polillo and Guillen’s data, the coefficient does not achieve
statistical significance. If I replace their data with mine, on the same sample, the
coefficient becomes statistically significant. This suggests that differences in coding also
play a role. Finally, I replicate the exercise using Bodea and Hicks’ data. In their sample,
both their variable and mine are negative and statistically significant.
Table 2. Association between CBI, inflation, unemployment and growth. Different
datasets and samples
DV: Inflation
DV: Unemployment
DV: GDP growth
CBI measure
(high income)
Garriga (middle &
lower income)
(model 4)
Polillo & Guillen
(model 6)
Bodea & Hicks
(model 8)
Notes: DV: dependent variable. N: sample size. Coefficients after panel regression with
fixed effects. Constant and lagged dependent variable omitted, t-values between
This exercise is more interesting for the other two dependent variables. The
(marginally significant) negative association between CBI and unemployment in the full
sample disappears when the same model is run using any of the other datasets’
subsamples (t-values<1). Separating this article’s sample between developed and
developing countries show a significant negative relationship for the first group of
countries, and positive but insignificant coefficient for developing countries. The same
analysis run on the Polillo and Guillen and the Bodea and Hicks samples also shows
opposite directions for both groups of countries, but these coefficients are highly
significant (not shown in table).
Finally, the opposite happens with GDP growth: CBI is far from achieving
statistical significance in the full sample. However, CBI becomes significant at
conventional levels in all the other datasets’ samples. If the analysis is run dividing each
of the samples between developed and developing countries, it is evident that the lack of
significance in my full sample is a consequence of divergent relationships between CBI
and growth in these two groups of countries (in the full sample, these opposite effects
cancel each other). If I split the other datasets’ samples, developing countries also show a
positive relationship between CBI and growth. However, I find a non-statistically
significant positive relationship for developed countries, suggesting that the results in the
aggregate are driven by developing countries (and differences in coding or sample
selection for developed countries).
These simple regressions show that differences in coding and sample selection
may have important effects on relationships of interest for the study of CBI. Differences
in coding are a main source of variance with the decade-invariant CWN data, and with
Polillo and Guillen’s data. Sample selection is especially problematic for smaller samples
analyzed here. Differences with Bodea and Hicks’ data are smaller because of their larger
sample and similar coding, but they appear when the analysis is broken down in sub-
samples of countries.
Final Remarks
This article introduces an original dataset coding central bank reforms and CBI in
182 countries between 1970 and 2012. The correlations with previous data suggest
consistent criteria when analyzing the legislation of interest. However, the importance of
this dataset derives from innovations over previously available data. First, this dataset has
a substantially broader coverage that will allow scholars to examine important research
questions in larger and more representative samples. Descriptive data presented here
shows that different samples offer different pictures of the worldwide dynamics of CBI
and central bank reform. Furthermore, non-representative samples may have affected
previous results, suggesting that there might be limits to the generalizability of some
empirical results in the literature.
The second feature of this dataset is a finer-grained analysis of the legislation
affecting CBI. A meticulous search of documents, together with the coding of sources in
multiple languages, made it possible to identify numerous central bank reforms previously
overlooked. Additionally, the fact the dataset’s coded reforms include both increases and
decreases in CBI opens new avenues for researching the determinants and consequences
of monetary institutions. For example, they suggest the possibility of developing a theory
to explain CBI restrictions or, more generally, liberalizing reforms reversals.
Furthermore, the careful identification of reforms also results in data with within-country
variance that can be exploited to answer different research questions, using CBI or
central bank reforms as explanatory variables.
Indices of legal CBI have been criticized because they may not accurately reflect
actual independence from the government. Furthermore, other aspects regarding the
design and actual operation of central banks, such as their transparency or accountability,
can be equally or even more important than CBI for certain research questions.
Nonetheless, de jure measures are suitable to explore the determinants of monetary
institutions. Of course, other factors such as regime type or rule of law need to be taken
into account to fully understand the effects or even the meaning of CBI in different
countries. CBI is seldom a consequence of merely monetary logics, and it may proxy
other domestic dynamics of interest for political scientists, such as executive powers,
institutional hurdles for reform, difficulties for reform implementation, or diffusion of
particular policies. The new dataset described here will permit researchers to address
these important questions in different fields with more certitude than was possible
before, harnessing in-depth data from a globally representative sample.
This dataset was presented at the workshop “Monetary Policy and Central Banking:
Historical Analysis and Contemporary Approaches,” Princeton University, February 6-7,
2015, at the REPAL annual conference, Montevideo, Uruguay, July 2-3, 2015, and at the
57th ISA Annual Convention, Atlanta, March 16-19, 2016. I thank the participants at
these events, David Bearce, Julia Gray, Brian Phillips, and the reviewers for their helpful
comments. Marc Grau, Santiago Minor, María Fernanda Nieto, Mauricio Ochoa, José
Manuel Toral, and Ludwig van Bedolla helped collecting legislation and coding different
waves of data. María Fernanda Porras provided excellent research assistance.
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Supplementary resource (1)

... While Garriga and Rodriguez (2020) address this question, the analysis is only limited to the developing countries, and therefore, the outcomes are limited to the scope considered. In other words, developed and emerging countries whose level of central bank independence is quite strong (Garriga, 2016) are completely ignored in the study. Thus, we offer a broader perspective where all the available categories of countries are captured in the analysis of the nexus between CBI and inflation. ...
... The dataset employed for this study are annual inflation rates collected from International Financial Statistics (IFS) of the IMF (see https://data.imf. org/?sk=4C514D48-B6BA-49ED-8AB9-52B0C1A0179BandsId=1390030341854) and the Central Bank Independence Index (CBI) obtained from Garriga (2016). The construction of CBI relies on the Cukierman et al. (1992) criteria to cypher proxies used to describe the attributes of the chief executive officer of the bank: ...
... One of the attractions to this technique lies in its suitability for long time-series dimension (T) and its ability to resolve any inherent nonstationarity as well as the associated endogeneity bias. The model has the following form: 5 where π it is the annual CPI-inflation series computed as 100*log (CPI it /CPI i,t-1 ) with CPI it being the consumer price index data for Country i at period t; cbi it is the central bank independence series based on the study of Garriga (2016); α i and δ i represent the heterogenous intercept and slope coefficients which are allowed to vary across the units; and e it is the error term. Note that e it is a composite error term comprising an unobserved common factor loading (f t ) accompanied with a heterogeneous factor loading (λ i ) and the remainder error term (μ it ) (see the appendix on the definition of various political regimes and levels of development). ...
Full-text available
In this paper, we explore the connection between Central Bank Independence (CBI) and inflation under alternative political regimes. We formulate a predictive model that accommodates CBI in the analysis of inflation and thereafter we regroup the countries based on the choice of political regimes as well as the level of development. We find that CBI has a statistically significant and negative effect on inflation in countries adopting full democratic and partial autocratic regimes; but are statistically insignificant in countries operating full autocratic and partial democratic regimes. The results leading to this conclusion are robust to different levels of development.
... Rights reserved. Garriga (2016) Content courtesy of Springer Nature, terms of use apply. Rights reserved. ...
... However, in the absence of an independent central bank, monetary policies could be less credible (De Haan et al., 2018). We use the index constructed by Garriga (2016) and, while the duration of both general financial crises and debt crises are not influenced by the level of central bank independence, we do find a strong effect for other types of crises. Our findings indicate that central bank independence increases the probability of banking, currency, and twin/triple crises ending. ...
Full-text available
Over the last four decades, banking crises around the globe have become longer. Along with the unprecedented government responses to the Great Recession of 2007–2008, protracted financial crises have led scholars to ask whether political decisions were somehow to blame. Despite growing concerns, little attention has been paid to the political and institutional determinants of financial crisis duration. This paper considers the role of these factors in determining the duration of systemic banking, currency, sovereign debt, and twin or triple coinciding crises. Relying on an extensive database of 125 countries observed over the 1976–2017 period and estimating a discrete-time duration model, we find that the electoral cycle, political ideology, majority governments, institutional quality, and central bank independence matter. This study shows that the duration dynamics of financial crises are idiosyncratic and must be examined individually. Finally, allowing for more flexible duration dependence patterns, we observe that the durations of both banking and twin or triple coinciding crises follow a nonmonotonic cubic model, while the probability of debt crisis ending declines monotonically over time.
Using panel data from 2004 to 2012, we employ a two-step system GMM estimation technique, with robust standard errors, collapsed instruments and illustrate marginal effects of central bank governor turnover rates on financial development given various measures of literacy rates to examine the impact of central bank independence on financial development in Africa and the moderating roles of literacy rates on the CBI-financial development nexus. Human capital enhances the positive impact of dejure CBI on financial development in countries with higher literacy rates and worsens the negative impact of de facto CBO on financial development. Independent central banks can be made more effective in achieving financial development targets through governments improving literacy rates. The study is the first to empirically examine the impact of central bank independence on financial development using both dejure and de facto CBI measures and literacy rates in explaining this relationship.
The “democratic advantage” in access to credit markets has been vigorously researched. Recent research has found that this “autocratic disadvantage” can be partly countered by other factors. However, this research agenda has largely ignored an increasingly important type of institution of direct importance for national fiscal policy, fiscal rules. This article argues that fiscal rules alleviate the “autocratic disadvantage” in sovereign bond market access. This argument is tested on a dataset on fiscal rules and sovereign bond issuing data covering 121 countries from 1990 to 2015. The results provide substantial evidence in favor of the argument, autocracies with fiscal rules face no disadvantage in bond market access and might even be more likely to issue new government bonds than democracies.
Theory associates the concepts of central bank independence (CBI), exchange rate regimes and monetary policy with price stability. Independent central banks and fixed exchange rates are institutional mechanisms that help keep inflation low by lending monetary policy credibility to governments. However, the two institutions are commonly analysed as substitutesSubstitutes that tie the hands of inflation-prone governments. Monetary policy effectiveness has also been a challenge in many developing countries; with suggestions that the institutional arrangement of central banks would have an impact on the outcome of monetary policy decisions. This study seeks to examine the interrelationships among these three concepts in Africa, where significant central bank independence reforms have taken place in both fixed and floating exchange rate regimes and with varied levels of monetary policy effectiveness. It uses data spanning 1970–2014, and a Two Step GMM, Two Stage Least Squares and Fixed Effects estimation methods. Results show that fixed exchange rate regimes have lower inflation rates than floating exchange rate regimes. However, CBI’s impact on inflation is higher in floating when compared to fixed exchange rate regimes. Also, monetary policy effectiveness is higher in Non-CFA Zone countries relative to CFA Zone countries. Its impact is enhanced by higher levels of CBI.
Governments interact strategically with sovereign bond market creditors: they make choices not only about how often and how much to borrow, but also under what terms. The denomination of debt, in domestic or foreign currency, is a critical part of these terms. The “original sin” logic has long predicted that creditors have little appetite for developing-country government debt issued in domestic currency. Our novel data, including bond issues by 131 countries in 240,000 primary market transactions between 1990 and 2016, suggest otherwise. Domestic-denominated bonds have come to dominate the market, although domestic-currency issuance often is accompanied by shorter bond maturities. We argue that ideologically rooted policy preferences play an important role in this unexpected trend in denomination. All else equal, right governments choose foreign denomination as a means of mitigating currency risk and thus minimizing borrowing costs. In contrast, left governments opt for the flexibility of domestic denomination, and they are better able to act on their preferences in the presence of risk-mitigating monetary institutions and macroeconomic stability. We find support for our argument that partisanship has a robust and enduring relationship with denomination outcomes, even in a marketplace in which domestic-denominated developing-country sovereign bonds have become the norm.
We propose a new conception of monetary sovereignty that acknowledges the reality of today’s global credit money system. Today, the concept is predominantly used to denote states that issue and regulate their own currency. We reject that Westphalian understanding of monetary sovereignty. Instead, we propose a conception of effective monetary sovereignty that focuses on what states are actually able to do in the era of financial globalization. The conception fits the hybridity of the modern credit money system by acknowledging the crucial role not only of central bank money but also of money issued by regulated banks and unregulated shadow banks. These institutions often operate “offshore”, outside of a state’s legal jurisdiction, which makes monetary governance more difficult. Monetary sovereignty consists in the ability of states to effectively govern these different segments of the monetary system and thereby achieve their economic policy objectives.
Motivated by a positive correlation between reserve accumulation and the widespread adoption of central bank independence legislation in Latin America, this paper develops a sovereign default model with an independent central bank that can accumulate a risk-free foreign asset. I show that if the central bank is more patient than the government and as patient as households are, in equilibrium, the government issues more debt than what is socially optimal, and the central bank accumulates reserves to undo government over-borrowing. A key insight is that the government can issue more debt for any level of reserves but chooses not to because doing so would increase spreads, making it more costly to borrow. Quantitatively, I find that the lack of perfect coordination between the central bank and the government can rationalize levels of reserves and debt close to the observed levels in emerging economies.
Many have argued that democracies are able to make credible commitments to repay their debts and consequently enjoy higher sovereign credit ratings. In contrast to this expectation, I argue that the advantage of democracies in credit ratings is conditional on the countries' level of financial vulnerability and adjustment needs. Because democracies have more diffuse decision‐making and are more accountable to the public, they encounter greater difficulty than autocracies in passing unpopular economic adjustment measures. Thus, I argue that democracies with high debt levels and low foreign reserve assets experience worse credit outcomes, whereas democracies with low vulnerability experience more positive outcomes. In a sample of up to 96 developing countries, I show that democracies have worse credit ratings and CDS Spreads and are more likely to default than their autocratic counterparts when foreign reserves are low relative to external debt. Notably, I also show that large debt burdens increase credit risk mainly in more democratic countries. I further test the causal pathway of the democratic advantage by constructing democracy scores of “market‐friendly” and “adjustment‐difficulty” democracy, finding that democracy worsens debt outcomes due to adjustment difficulty. These findings help to revise and clarify the causal logic surrounding the democratic advantage hypothesis.
Full-text available
Research on central bank independence (CBI) focuses overwhelmingly on domestic causes and consequences. We consider CBI in relation to global finance. A first step links decisions to reform central bank legislation to a perceived need to attract capital in the form of foreign direct investment or sovereign borrowing. A second step models investors' actual decisions as a function of CBI. We test our argument on a sample of 78 countries (1974-2007). Logit models investigate the determinants of central bank reform. Results show the effect of international capital through a directcompetition channel and through learning in the context of competition. Socialization of countries in networks of intergovernmental organizations is also a determinant of CBI reform. In addition, we show that CBI affects the flow and cost of capital in non-OECD countries, before CBI became globally widespread, and where political institutions allow the central bank to de facto be credible.
Full-text available
In the last twenty years many countries have reformed their central bank legislation by giving the bank more independence in monetary policy. A key assumption behind these law changes is that central bank independence (CBI) is an effective means of ensuring price stability. Yet the existing empirical evidence for an association between CBI and inflation has provided mixed results with the association being particularly weak in developing countries. We re-examine the relationship between central bank independence and price stability using a more encompassing theoretical approach and a new yearly data set for CBI from 1973 to present. Our theory traces the sources of the inflationary phenomenon and distinguishes the role of simply printing less money (discipline effect) from the public belief about what the monetary authority is likely to do (credibility effect). We further argue that democracies and dictatorships differ significantly in their application of the rule of law and the process of law change, depending on two measurable characteristics: the presence of relevant political opposition and the freedom to criticize the government in power. A first implication is that in democracies the central bank can be more conservative and this is reflected directly in lower rates of growth for the money supply. A second implication is that, addition to being directly more disciplinarian, a central bank whose credibility is enhanced by the configuration of democratic political institutions is also likely to insure a more robust money demand by reducing inflation expectations, and therefore leading to lower inflation.
Uses a game theoretic approach to explore which economic policies are 'credible' and 'politically feasible', questions that had eluded traditional macroeconomic approaches. © 1990 OPA (Overseas Publishers Association). All rights reserved.
A new international data set covering over 100 countries for the period 1990-2004 is used to investigate the relationship between central bank independence (CBI) and inflation. CBI is a combination of de jure and de facto characteristics. No single mix of characteristics uniquely defines CBI. Consequently, no single definition of CBI is 'right' for all countries. The distribution of inflation around the world is concentrated in the tails. Hence, quantile regressions are estimated to investigate the role of CBI. We do find strong evidence that several core elements of what can be defined as CBI do reduce inflation.
Alex Cukierman is well known for his work on central bank behavior. This book brings together a large body of Cukierman's research and integrates it with recent developments in the political economy of monetary policy. Filled with applications and carefully worked out technical detail, it provides a valuable comprehensive analysis of central bank decisions, of the various effects of policy on inflation, and of the feedback from inflationary expectations to policy choices. Cukierman uncovers and analyzes the reasons for positive inflation and rates of monetary expansion. He shows that the money supply, and therefore inflation, are not exogenous. They are influenced by interactions involving distributional considerations, private information, personal motives, and the political environment. This point of view makes it possible to identify the institutional, political, and other features of a country that may be conducive to inflationary environments. Cukierman presents new multidimensional evidence on both legal and actual central bank independence for a sample of up to 70 countries and uses it to investigate the interconnections between the distributions of inflation and of central bank independence. He takes up such issues as why some countries have more independent central banks than others and identifies reasons for the substantial cross country variation in seigniorage. He provides positive explanations for the tendency of central banks, like the US Federal Reserve, to smooth interest rates and to be secretive. Observing that it is likely that the European Economic Community will have a monetary union before the turn of the century, Cukierman applies the techniques of modern political economy to discuss the effect of this change on the commitment to price stability. The book includes simple and advanced materials as well as informal summaries of the major technical results. The introduction contains a modular guide for reading and teaching the material.
This book examines the current state of central banking in 44 developing countries. The authors analyse the banks' achievement in their primary objective of price stability and discuss the reasons behind the general lack of success. The book covers government financing, foreign exchange systems and the domestic banking system. The authors conclude that central banks in developing countries face radically different environments from those faced by the richer OECD countries. Based on macroeconomic data from IMF and World Bank sources, as well as detailed questionnaire responses, the authors analyse central banking in Africa, Asia, the Middle East, Europe, Latin America and the Carribbean. -Authors
The authors examine the impact of globalization on state structures in the specific instance of the central bank. Following the world-system, world-society, and neoinstitutional perspectives in sociology, they assume that states are in cultural, political, and economic competition with each other, thereby seeking to maintain their position and status, frequently by adopting organizational forms or practices that make them isomorphic with their environment. The authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade, investment, and multilateral lending increases. They also model the cross-national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role-equivalent trade relationships between countries. They find support for their hypotheses with information on 71 countries between 1990 and 2000.
This article reviews recent contributions addressing the following questions: Under what circumstances is monetary policy delegated to politically independent central banks? What effects do these politically independent institutions have, and how do they interact with their macroeconomic institutional environment? What explains the variation in their behavior? And finally, to what extent has the recent economic crisis altered the role of these institutions? In answering these questions, this article advances two arguments. First, even though central banks' activities involve a great deal of technical knowledge, they are unavoidably political institutions: They make distributional choices informed by ideas, preferences, and the political context in which they operate. Second, the economic crisis, by expanding the type of activities that monetary authorities undertake, further contributes to the politicization of these institutions. The final section of the article speculates about the implications of these developments for economic policy making in contemporary democracies.
Politics Alberto Alesina Influences from political competition on macroeconomic policy are often thought to be a source of economic fluctuations. Politicians are described as being driven by two, not mutually exclusive, main motivations: they want to be reelected and they harbour political, or ideological, biases. When such theories are confronted with actual cycles in a number of industrial countries, the pattern of inflation, unemployment, output, and budget deficits indicates that partisan policy making is a fairly widespread phenomenon, with more limited evidence that electoral preoccupations result in major fluctuations. The combination of partisanship and electoral cycles may easily result in socially undesirable outcomes. In particular the degree of politico-institutional stability and the independence of the Central Bank have a bearing on macroeconomic outcomes. These observations raise a number of important questions about the design of political institutions.
Clark, William R., Sona N. Golder, and Paul Poast. (2012) Monetary Institutions and the Political Survival of Democratic Leaders. International Studies Quarterly, doi: 10.1111/isqu.12013 © 2012 International Studies Association According to the political business cycle literature, survival-maximizing leaders will manipulate whatever macroeconomic policy instruments they have at their disposal in order to retain power. However, an obvious implication of the political business cycle literature has not previously been adequately tested: does having the ability to manipulate macroeconomic policy instruments actually allow leaders to stay in office longer? We argue that elected leaders who have neither fiscal nor monetary instruments available for electoral purposes will find it more difficult to survive in office. We test this claim using data from 19 OECD countries in the latter part of the twentieth century when the degree of capital mobility in the international economy was high. We find that access to macroeconomic instruments does help leaders retain office, but that these instruments are only effective for leaders who have been in office for at least 7 years.