Central Bank Independence and the Short-Run Output-Inflation Trade-off in the European Community

  • Carl E. Walsh
Part of the European and Transatlantic Studies book series (EUROPEANSTUDIES)


The member countries of the European Community (EC) have established a process for moving toward a common monetary policy conducted by a single European Central Bank (ECB). The structure of this new policy institution, modeled after the German Bundesbank, has been specifically designed to guarantee it a high degree of independence from political influences. Empirical evidence linking independent central banks with low average inflation played an important role in giving impetus to the creation of a common central bank with substantial political independence.2


Central Bank European Central Bank Phillips Curve Seemingly Unrelated Regression Central Bank Independence 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Alesina, A. “Macroeconomics and politics.” In Fischer, S. (ed.), NBER Macroeconomics Annual. Cambridge, MA: MIT Press, 1988.Google Scholar
  2. Alesina, A., and Summers, L.H. “Central bank independence and macroeconomic performance: some comparative evidence.” Journal of Money, Credit and Banking 1993, 25: 157–162.CrossRefGoogle Scholar
  3. Bade, R., and Parkin, M. “Central bank laws and inflation — a comparative analysis.” University of Western Ontario, 1982.Google Scholar
  4. Ball, Laurence. “Is equilibrium indexation efficient?” Quarterly Journal of Economics 1988, 103: 299–311.CrossRefGoogle Scholar
  5. Ball, Laurence. “What determines the sacrifice ratio?” Unpublished manuscript, Princeton University, March 1993.Google Scholar
  6. Ball, Laurence, Mankiw, N. Gregory, and Romer, David. “The new Keynesian economics and the output-inflation trade-off.” Brookings Papers on Economic Activity 1988 (1), 1–65.CrossRefGoogle Scholar
  7. Banaian, K., Laney, L.O., and Willett, T.D. “Central bank independence: an international comparison.” Federal Reserve Bank of Dallas Economic Review 1983, 1–13.Google Scholar
  8. Canzoneri, Matthew. “Labor Contracts and Monetary Policy.” Journal of Monetary Economics 1980, 6: 241–255.CrossRefGoogle Scholar
  9. Capie, F.H., and Wood, G.E. “Central banks and inflation: an historical perspective — Part I.” Central Banking 1991, 2: 27–46.Google Scholar
  10. Capie, F.H. and Wood, G.E. “Central banks and inflation: an historical perspective — Part II.” Central Banking 1991, 2: 38–57.Google Scholar
  11. Cargill, Thomas. “The statistical association between central bank independence and inflation.” Unpublished manuscript, University of Nevada, Reno, 1994.Google Scholar
  12. Croushore, Dean C., and Kroot, Ronald S. “A measure of Federal Reserve credibility.” Journal of Policy Modelling 1994, 16: 215–231.CrossRefGoogle Scholar
  13. Cukierman, Alex. Central Bank Strategy, Credibility and Independence. Cambridge, MA: MIT Press, 1992.Google Scholar
  14. Cukierman, A., Kalaitzidakis, P., Summers, L., and Webb, S. “Central bank independence, growth, investment and real rates.” Carnegie-Rochester Conference Series on Public Policy 1993, 39: 95–140.CrossRefGoogle Scholar
  15. Cukierman, A., Webb, S.B., and Neyapti, B. “Measuring the independence of central banks and its effects on policy outcomes.” World Bank Economic Review 1992, 6: 353–398.CrossRefGoogle Scholar
  16. Debelle, Guy, “The ends of three small inflations: Australia, New Zealand and Canada,” MIT, March 1994.Google Scholar
  17. Debelle, Guy, and Fischer, Stanley. “How independent should a central bank be?” Paper presented at the Center for Economic Policy Research and Federal Reserve Bank of San Francisco Conference on Monetary Policy in a Low Inflation Regime, March 1994.Google Scholar
  18. Devereux, Michael. “The effect of monetary variability on welfare in a simple macroeconomic model.” Journal of Monetary Economics 1987, 19: 427–435.CrossRefGoogle Scholar
  19. Egebo, Thomas, and Englander, A. Steven. “Institutional commitments and policy credibility: a critical survey and empirical evidence from the ERM.” OECD Economic Studies 1992, 18: 45–84.Google Scholar
  20. Fratianni, Michele, and Huang, Haizhou. “Reputation, central bank independence and the EBC.” Indiana University Working Paper No. 92–031, December 1992.Google Scholar
  21. Goodhart, Charles. “Central bank independence.” Journal of International and Comparative Economics (forthcoming).Google Scholar
  22. Gray, Jo Anne. “On indexation and contract length.” Journal of Political Economy 1978, 86: 1–18.CrossRefGoogle Scholar
  23. Gray, Jo Anne, and Kandil, Magda. “Is price flexibility stabilizing? a broader perspective.” Journal of Money, Credit and Banking 1991, 23: 1–12.CrossRefGoogle Scholar
  24. Grilli, Vittorio, Masciandaro, Donato, and Tabellini, Guido. “Political and monetary institutions and public financial policies in the industrial countries.” Economic Policy 1991, 13: 342–392.Google Scholar
  25. Hetzel, Robert L. “Central banks’ independence in historical perspective.” Journal of Monetary Economics 1990, 25: 165–176.CrossRefGoogle Scholar
  26. Johnson, David R., and Siklos, Pierre L. “Political effects on central bank behavior: some international evidence.” Wilfrid Laurier University, March 1993.Google Scholar
  27. Judd, John P., and Beebe, Jack H. “The output-inflation trade-off in the United States: has it changed since the late 1970s?” Federal Reserve Bank of San Francisco Economic Review 1993, 3: 25–34.Google Scholar
  28. Lucas, Robert E., Jr. “Some international evidence on output-inflation tradeoffs.” American Economic Review 1973, 63: 326–344.Google Scholar
  29. Pollard, Patricia S. “Central bank independence and economic performance.” Federal Reserve Bank of St. Louis Review 1993, 75: 21–36.Google Scholar
  30. Posen, Adam S. “Why central bank independence does not cause low inflation: there is no institutional fix for politics.” O’Brien, R. (ed.), Finance and the International Economy: 7 (The 1993 Amex Bank Review Prize Essays). Oxford, England: Oxford University Press, 1993.Google Scholar
  31. Rogoff, Kenneth. “The optimal degree of commitment to an intermediate monetary target.” Quarterly Journal of Economics 1985, 100: 1169–1189.CrossRefGoogle Scholar
  32. Sargent, Thomas. “The ends of four big inflations.” In Hall, R. (ed.), Inflation: Causes and Effects. Chicago: University of Chicago Press, 1982, pp. 41–98.Google Scholar
  33. Schelde-Andersen, Palle. “OECD country experiences with disinflation.” In Blundell-Wignall, A. (ed.), Inflation, Disinflation and Monetary Policy. Sydney, Australia: Reserve Bank of Australia, 1992, pp. 104–173.Google Scholar
  34. Schultze, Charles L. “Cross-country and cross-temporal differences in inflation responsiveness.” American Economic Review 1984, 74: 160–165.Google Scholar
  35. Waller, Christopher J., and David, VanHoose. “Discretionary monetary policy and socially efficient wage indexation.” Quarterly Journal of Economics 1992, 107: 1,451–1,460.Google Scholar
  36. Walsh, Carl E. “Central bank strategies, credibility and independence: a review essay.” Journal of Monetary Economics 1993, 32: 287–302.CrossRefGoogle Scholar
  37. Walsh, Carl E. “Is there a cost to central bank independence?” Federal Reserve Bank of San Francisco Weekly Letter, 94–05, February 4, 1994.Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 1995

Authors and Affiliations

  • Carl E. Walsh

There are no affiliations available

Personalised recommendations