INSTITUTIONAL PATH OF CENTRAL BANK INDEPENDENCE STRENGTHENING IN EMERGING MARKETS: ROLE OF INFLATION TARGETING AND EU ACCESSION

Анотація

Emerging market countries implemented a similar set of structural reforms. However, were there differences in the institutional paths of strengthening central bank independence (CBI)? Yes. The introduction of inflation targeting had a statistically significant impact on strengthening CBI in Central and Eastern European (CEE) countries, especially in the new EU member states. EU membership had a greater impact on the level of CBI than on the timing of its most significant strengthening. The inflation performance in the region indicates that the reforms were not merely formal, which is facilitated by the higher rule of law index in the new EU members compared to most emerging market countries. The institutional path of CBI strengthening in CEE countries is much more consistent with theoretical assumptions about the need for such independence to implement inflation targeting, as well as its positive impact on the ability to maintain price stability. This contrasts with the examples of many other inflation-targeting emerging market countries, where either central bank reforms have been formal in nature or price stability is maintained based on informalized institutional changes around monetary authorities.

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