CESifo Working Paper No. 511
June 2001
INFLATION IN DEVELOPING COUNTRIES:
DOES CENTRAL BANK INDEPENDENCE
MATTER?
NEW EVIDENCE BASED ON A NEW DATA
SET
Abstract
We analyse whether central bank independence (CBI) affects
inflation in developing countries. For this purpose we have
constructed a new data set for the turnover rate (TOR) of central
bank governors for a very large sample of countries, which also
covers the 1990s. We find that once various control variables are
included, the CBI proxy is often not significant. We also conclude that
in those regressions in which the CBI proxy is significant, the
coefficient of the TOR becomes significant only after high inflation
countries are added to the sample.
JEL Classification: E58, E52.
Keywords: Inflation, central bank independence.
Jan-Egbert Sturm
Department of Economics
University of Groningen
PO Box 800
9700 AV Groningen
The Netherlands
Jakob de Haan
Department of Economics
University of Groningen
PO Box 800
9700 AV Groningen
The Netherlands
[email protected]