The Effectiveness Of Macroeconomic Commitment In Weak(er) Institutional Environments

This paper analyzes the institutional conditions affecting the establishment and effectiveness of independent central banks and of budgetary institutions. It draws on the recent theory developed by North, Wallis and Weingast on the transition from a closed and fragile state to an open economic and political environment. The paper presents a composite indicator allowing for the identification of a country's position along this transition path. The findings suggest that (i) while the establishment of autonomous central banks seems to be relatively independent from the broader institutional framework, (ii) while central bank independence is effective in reducing inflation irrespective of a country's position along the transition path.

Provided by: International Monetary Fund Topic: CXO Date Added: Aug 2010 Format: PDF

Download Now

Find By Topic