CEIS Research Papers

Informal central bank independence: an analysis for three European countries
Cobham David, Cosci Stefania and Mattesini Fabrizio
CEIS Research Paper

Published in Scottish Journal of Political Economy, Vol.55, n.3, 2008

Changes in formal and informal central bank independence (CBI) in France, Italy and the UK in the period from the mid-1970s to the 1990s are examined; the major changes occurred in the 1990s, after the disinflations of the 1980s. Broad trends in the informal independence of central banks, defined as the ability to pursue price stability regardless of the government’s preferences, are identified on the basis of a monetary policy narrative and an analysis of a set of qualitative determinants of informal independence. The most important determinants are the social/political acceptance that monetary policy is the sphere of the central bank, the existence of antiinflationary commitments in the form of intermediate targets for monetary policy, the degree of social consensus on the means and ends of macroeconomic policy, and the relative technical expertise of the central bank. These broad trends help to explain some of the inflation experience of the 1980s and 1990s which cannot be understood in terms of changes to formal CBI.

Number: 116

Keywords: Monetary policy, central bank independence, inflation

JEL-codes: E42,E58

Volume: 6

Issue: 4

Date: 14/07/2008