Brazilian Inflation from 1980 to 1993: Causes, Consequences and Dynamics

1996 ◽  
Vol 28 (3) ◽  
pp. 635-666 ◽  
Author(s):  
G. Tullio ◽  
M. Ronci
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Central Bank Independence ◽  
Budget Deficits ◽  
The Government ◽  
Exchange Rate Shocks

AbstractThis article focuses on Brazilian inflation: its causes, consequences and dynamics from 1980 to 1993. We argue that the main economic cause of the Brazilian inflation was the excessive growth of money, in turn caused by too high budget deficits. Oil and exchange rate shocks also played a role, together with the greater dependence of the Central Bank of Brazil on the government. We measure the degree of Central Bank independence by the variable ‘turnover’ of Central Bank governors defined as the number of months in office. The effect of this variable on inflation is found to be highly significant and positive.

Peaks and Troughs

2019 ◽  
pp. 58-98 ◽  
Author(s):  
Donato Masciandaro ◽  
Davide Romelli
Keyword(s):  
Political Economy ◽  
Central Bank ◽  
Institutional Design ◽  
Theoretical Perspective ◽  
Central Bank Independence ◽  
Banking Supervision ◽  
Macroeconomic Shocks ◽  
Increasing Trend ◽  
The 2008 Financial Crisis ◽  
Exchange Rate Shocks

This chapter investigates the endogenous evolution of central bank institutional design over the past four decades. From a theoretical perspective, it employs a stylized political economy model to highlight some key determinants of the level of central bank independence as a function of macroeconomic shocks and political economy characteristics of countries. It then employs recently developed dynamic indices of central bank design to describe the evolution of central bank independence over the period 1972–2014. In a sample of sixty-five countries, it shows that the increasing trend in central bank independence during 1972–2007 has been reversing after the 2008 financial crisis, mainly due to significant changes to the roles of central banks in banking supervision. The authors find that this evolution can be related to several macroeconomic shocks, such as inflationary, fiscal, and exchange-rate shocks.

scholarly journals Central banks and civil war termination

2021 ◽  
pp. 002234332110381
Author(s):  
Ana Carolina Garriga
Keyword(s):  
Civil War ◽  
Central Bank ◽  
Interest Rates ◽  
Civil Wars ◽  
Central Banks ◽  
Central Bank Independence ◽  
War Termination ◽  
International Credit ◽  
The Government ◽  
Good Signal

The ability to finance conflict likely affects the odds of sustaining a war and succeeding in it. Recent literature explores rebel group funding, but far less is known about how states finance their own war efforts. This article posits that the design of central banks should affect civil war termination. In particular, it argues that central bank independence affects civil war termination through two channels. First, financial markets consider central bank independence as a good signal in terms of macroeconomic stability and debt repayment. In this way, independent central banks enhance the ability of the government to access credit to finance and end a civil war. Second, central bank independence is associated with lower inflation. Inflation control reduces one source of additional grievances that the civil war may impose on citizens. On a sample of civil wars between 1975 and 2009, central bank independence is associated with a substantial increase in the likelihood of war termination. When the form of termination is disaggregated, (higher) central bank independence is associated with a higher probability of government victory, relative to continued conflict and to other outcomes. Additional tests provide support for the argued mechanisms: during civil wars, countries with more independent central banks access international credit markets in better conditions – i.e. they pay lower interest rates, and receive longer grace and maturity periods on new debt. Furthermore, in countries experiencing civil wars, central bank independence is associated with lower inflation.

scholarly journals Opportunistic, not Optimal Delegation: The Political Origins of Central Bank Independence

2020 ◽  
pp. 001041402095767
Author(s):  
Nicole Rae Baerg ◽  
Julia Gray ◽  
Jakob Willisch
Keyword(s):  
Central Bank ◽  
Formal Model ◽  
Central Banks ◽  
Central Bank Independence ◽  
Political Experience ◽  
Different Types ◽  
The Government ◽  
Communist Countries ◽  
Optimal Delegation ◽  
Central Bankers

Economists have long argued that central banks ran by technocrats have greater independence from the government. But in many countries, politically experienced central bankers are at the helm, including even highly independent central banks. To explain the level of central bank independence awarded, we develop a formal model where nominating politicians screen central bankers for their political ambitions. We show how screening and reelection efforts by the nominating politician changes the level of autonomy associated with different types of candidates. We predict that technocrats are associated with higher levels of independence than nominees with political experience, but as the appointing politician faces tougher reelection, candidates with political experience are associated with higher independence as well. We test our theory using new data from 29 post-communist countries between 1990 and 2012. We find evidence that the reelection strategy of the nominating politician is an important predictor of the level of central bank independence.

The Bank of Japan: Central Bank Independence and the Politicization of Monetary Policy

2021 ◽  
Author(s):  
Gene Park
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Prime Minister ◽  
Central Bank Independence ◽  
Executive Power ◽  
Theoretical Justification ◽  
Electoral Incentives ◽  
Economic Stagnation ◽  
Bank Of Japan ◽  
The Government

In April 1998, the Bank of Japan (BOJ) gained legal independence. While the primary theoretical justification was to enhance the central bank’s inflation-fighting credibility, the newly independent BOJ immediately confronted a different and unexpected problem: a long and persistent deflation. As the government battled economic stagnation, debates over the extent to which the BOJ should prioritize overcoming deflation and the policies that should be employed to this end led to a profound politicization of monetary policy. This culminated in the Prime Minister Abe’s landslide electoral victory at the end of 2012 in which he campaigned on overcoming deflation, and then, once in power, effectively took over control of a previously intransigent BOJ Policy Board to reflate the economy. The democratic electoral process paved the way for a reassertion of control over the still legally independent central bank. From a wider perspective, these developments reflect broader changes in Japanese democracy: the greater influence of electoral incentives on policy and the centralization of executive power.

Exchange Rate Regime Preferences and Budget Deficits in Open Economies

2021 ◽  
pp. 65-89
Author(s):  
Mustafa Kiziltan
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Trade Openness ◽  
Open Economies ◽  
Demographic Factors ◽  
Generalized Least Squares ◽  
Budget Deficits ◽  
Fiscal Discipline ◽  
Exchange Rate Shocks ◽  
High Level

This study investigates the impacts of exchange rate regime (ERR) choice, economic, institutional, and demographic factors on the budget deficit. The recent literature states that fiscal discipline is affected by the ERR preferences in open economies. In this study, the effect of de facto ERR preferences on fiscal discipline were analyzed between 1995 and 2016 for 76 countries classified into income groups. The estimates by Feasible Generalized Least Squares and Panel Corrected Standard Errors estimators show that flexible ERRs provide much more fiscal discipline. The findings highlight the importance of institutional quality, demographic factors, and inflation to ensure fiscal discipline. A country with a high level of trade openness is more vulnerable to exchange rate shocks, which leads to uncertainty in the fiscal policy. The results confirm that ERR preferences affect countries' fiscal disciplines differently, depending on the countries' characteristics.

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