scholarly journals Central Bank Independence – The Case of the Central Bank of Montenegro

2018 ◽  
Vol 7 (3) ◽  
pp. 25-40
Author(s):  
Milivoje Radovic ◽  
Milena Radonjic ◽  
Jovan Djuraskovic
Keyword(s):  
Economic Theory ◽  
Central Bank ◽  
Inflation Rate ◽  
Central Banks ◽  
Transition Countries ◽  
Central Bank Independence ◽  
Executive Power ◽  
Eu Accession ◽  
Key Factor ◽  
The Eu

Abstract In recent decades, there has been a trend in increasing the level of independence of central banks. The key factor that has contributed to a growing interest in this concept is grounded in economic theory that confirms the link between a lower inflation rate and a greater level of central bank independence. For this reason, in many countries, the existing regulations relating to central bank have been modified to protect its position from the absolute influence of the executive power of the state. This trend was particularly prevalent in transition countries, which was conditioned primarily by the EU accession criteria. The aim of this paper is to analyse independence of the Central Bank of Montenegro through the prism of functional, institutional, financial, and personal independence, and to assess the level of its legal independence by using appropriate indices.

scholarly journals Central bank independence and its effect on money market stability

2012 ◽  
Vol 2 (1) ◽  
pp. 112
Author(s):  
MSc. Anera Alishani
Keyword(s):  
Central Bank ◽  
Transition Countries ◽  
Money Market ◽  
Central Bank Independence ◽  
Western Balkans ◽  
Market Growth ◽  
Main Research ◽  
Research Task ◽  
Stable Growth ◽  
The Relationship

Since 1990s many countries have moved toward greater central bank independence (CBI) by either amending their Central Bank’s laws or writing them de novo. Also countries of Western Balkans and many other transition countries have moved toward greater CBI. There are many potential benefits associated with greater CBI, and one of them is stable growth of money and liquidity. For a given level of money market development the hypothesis is that a more independent CB is likely to promote more stable growth of money supply (Dželetović et al., 2008). As a result the main research task of this work is to estimate the effects of CBI on money market growth for five Western Balkans countries and five other European transition countries. Because the empirical studies were very limited for the relationship between CBI and money market growth, there were no clear conclusions. In addition, there were different measuring methodologies that attempt to quantify the extent of legal and actual CBI. Related to the main research task, this dissertation has examined the effects of CBI on money market stability (proxied by bank deposit growth) for a sample of 10 countries for a period from 1999-2009 by using fixed effect model. Through this methodology different regressions have been estimated, but the results were not robust and there are no clear finding on the relationship between CBI and money market growth.

scholarly journals Central Bank Independence, Transparency and Accountability Indexes: a Survey

2014 ◽  
Vol 7 (1) ◽  
pp. 35-54 ◽  
Author(s):  
Florin Cornel Dumiter
Keyword(s):  
Central Bank ◽  
Central Banks ◽  
Central Banking ◽  
Central Bank Independence ◽  
Advantages And Disadvantages ◽  
Aggregate Index ◽  
Central Bank Transparency ◽  
Considerable Impact ◽  
High Degree ◽  
Transparency And Accountability

Abstract Recently, the remarkable trend upon central bank independence and the efficient monetary policy were seriously highlighted in the monetary economics field. Starting from 1990s’ central bank independence was at the core of policy making and central banking problems, because of the widespread economical, political, personal and budgetary autonomy of the central bank. Nowadays, we can observe an increasing trend upon central bank transparency, for evaluating more accurate the central bank’s performances by the wide public, mass-media and financial markets. Consequently, a central bank must encompass a high degree of accountability and responsibility, because of the final liability in case of failure. In this paper we present, analyze and assess the construction of the most important indices regarding central bank independence, transparency and accountability in a chronological manner, presenting also the advantages and disadvantages of these indices related to actual practices of central banks. Moreover, we analyze the analytical results of the empirical testing of these indices with a considerable impact upon the developed and developing country group. In regard with the empirical results of different authors, we suggest the importance and the necessity for constructing an aggregate index for measuring central bank independence, transparency and accountability, based on de jure stipulations and the actual practices of the central banks.

The European Central Bank

2018 ◽  
Author(s):  
Chiara Zilioli ◽  
Phoebus Athanassiou
Keyword(s):  
European Union ◽  
Central Bank ◽  
Monetary Union ◽  
European Central Bank ◽  
Central Banks ◽  
The European Union ◽  
European Central ◽  
European System ◽  
The Eu

The provisions on Monetary Union (MU), of the Treaty on the functioning of the European Union (TFEU or the Treaty), as well as the Statute of the European System of Central Banks and of the European Central Bank (the Statute), are important in their own right, and are amongst those from which any student of the European Union (EU) can learn a great deal with regard to the EU.

Does Central Bank Independence in Arab Oil Exporters Matter?

2019 ◽  
pp. 119-148 ◽  
Author(s):  
Hoda Selim
Keyword(s):  
Central Bank ◽  
Oil Prices ◽  
Macroeconomic Policy ◽  
Executive Branch ◽  
Central Banks ◽  
Institutional Arrangements ◽  
Central Bank Independence ◽  
Policy Outcomes ◽  
Policy Performance ◽  
Weak Institutions

This chapter shows that central banks in Arab oil exporters are not independent. Low independence reflects institutional arrangements that allow the executive branch to influence, interfere, even dominate central bank operations. In a context of weak institutions, central bank independence (CBI) has not always mattered for macroeconomic policy outcomes. Gulf Cooperation Council (GCC) central banks delivered a better macroeconomic policy performance than those of the populous group because the credible peg discouraged discretion. Soft peg arrangements in the populous economies, in a context of weak institutions and discretionary policymaking and no de facto independent central bank, led to disappointing monetary policy outcomes. As oil exporters adapt to a new normal of low oil prices, the sustainability of fixed exchange rate regimes may not be guaranteed without sound macroeconomic institutions. Stronger institutions and effective accountability mechanisms are needed to insulate central banks from political pressures. In the short term, a rules-based framework could help.

scholarly journals Financial Independence of Central Bank through the Balance Sheet Prism

2014 ◽  
Vol 3 (2) ◽  
pp. 37-59 ◽  
Author(s):  
Valentina Ivanović
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
Central Banks ◽  
Central Bank Independence ◽  
Financial Independence ◽  
Balance Sheets ◽  
Financial Strength ◽  
The Global Financial Crisis

Abstract The main reason for central bank independence lies in the fact that it is necessary to clearly distinguish spending money from the ability of making money. Independence of central banks is now a characteristic of almost all developed and highly industrialized countries. In this respect, it represents an essential part of the overall economic reality of these countries. Over the past decade or somewhat earlier, the issue of importance of central bank independence has been raised in developing countries, making the institutional, functional, personal and financial independence of central banks current topics for consideration. The key reason for the growing attention to financial independence of central banks is due to the effects of the global financial crisis on their balance sheets and therefore the challenges related to achieving the basic goals of the functioning of central banks - financial stability and price stability. Financial strength and independence of central banks must be developed relative to the policy and tasks that are carried out and risks they face in carrying out of these tasks. Financial independence represents a key base for credibility of a central bank. On one hand, the degree of credibility is associated with the ability of central banks to carry out their tasks without external financial assistance. In order to enhance the credibility of central bank in this regard, it must have sufficient financial strength to absorb potential losses and that power must be continuously strengthened by increasing capital and rearranging profit allocation arrangements. This is particularly important in times of crisis.

The Liquidity Trap, Democracy and Central Bank Independence

2014 ◽  
Vol 61 (1) ◽  
pp. 16-29
Author(s):  
Lucian Croitoru
Keyword(s):  
Financial Crisis ◽  
Central Bank ◽  
Developed Countries ◽  
Central Banks ◽  
Central Bank Independence ◽  
The Other ◽  
Quantitative Easing ◽  
Potential Conflict ◽  
Liquidity Trap ◽  
Other Hand

Abstract In the wake of the financial crisis, central banks in developed countries performed unconventional operations that are fiscal in nature. On one hand, we support the view that such operations, which are not fully democratic, might lead to loss of central bank operational independence and discuss some difficulties that central banks might face when reversing quantitative easing. On the other hand, we show that, in the middle of a financial crisis, such operations are best performed by central banks. To avoid this potential conflict, the society needs to identify the best means by which the responsibility for quasi-fiscal operations implemented by the central bank is transferred to a democratic structure

scholarly journals Central Bank Independence and Inflation IN EU-28

2017 ◽  
Vol 22 (4) ◽  
pp. 253-262
Author(s):  
Daniela-Georgeta Beju ◽  
Maria-Lenuţa Ciupac-Ulici ◽  
Codruța-Maria Fǎt
Keyword(s):  
European Union ◽  
Central Bank ◽  
Monetary Union ◽  
Central Banks ◽  
Central Bank Independence ◽  
Price Stability ◽  
Economic And Monetary Union ◽  
Great Level ◽  
Member States ◽  
High Level

Abstract Today, both policymakers and academicians consider that the central bank’s main goal is to guarantee price stability. The central bank can sustain the government’s economic policies, but only without prejudicing this objective. In order to focus on price stability several studies found that central bank should have a high level of independence. This is why during the recent decades the majority of developed countries, but also several emerging economies have employed institutional reforms that conferred their monetary authorities – the central bank – more independence. Within the European Union the central bank independence is a crucial issue, since the Maastricht Treaty stipulates that one requirement for joining Economic and Monetary Union for the candidate member states is to give their central banks a sufficiently high level of independence. This official requirement has encouraged the countries from Centre and East Europe engaged on the way to adhere the Economic and Monetary Union to confer their central bank a great level of independence. In this paper we analyze some important theoretic issues about central bank independence. We also make an empirical investigation regarding the evolution of inflation within European Union relative to the independence of member states’ central banks.

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 Effectiveness of Central Bank Independence via Its Internal Characteristics

2011 ◽  
Author(s):  
Caroll H. Griffin
Keyword(s):  
Central Bank ◽  
Informal Economy ◽  
Developing Economies ◽  
Developed Countries ◽  
Central Banks ◽  
Central Bank Independence ◽  
Reserve Requirements ◽  
Formal Economy ◽  
The Impact ◽  
Macroeconomic Environment

This study examines central bank independence in developing countries of Latin America and Asia as well as selected developed countries. Many countries around the world, both developed and developing, have accepted the idea of central bank independence over the last several decades, so central banks have autonomy. A majority of studies has examined primarily the impact of central bank independence on inflation as promoting the theoretical benefits of a more stable and prosperous macroeconomic environment. However, there is only now sufficient data to empirically determine whether these claims are true. This research attempts to answer why developing economies with an informal sector resort to inflationary measures to finance their activities; how does a government induce an agent to choose the formal economy. In the trade-off between inflation and reserve requirements, the optimal policy is maximum inflation and minimum reserve requirements as increasing the steady-state utility of an optimizing agent. Also agents prefer the informal economy if policy relies on a maximum reserve requirement.  

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.

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