Premium
The Impact of Central Bank Independence on Political Monetary Cycles in Advanced and Developing Nations
Author(s) -
ALPANDA SAMI,
HONIG ADAM
Publication year - 2009
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2009.00260.x
Subject(s) - monetization , independence (probability theory) , monetary policy , politics , economics , developing country , central bank , monetary economics , inflation targeting , exploit , forward guidance , macroeconomics , international economics , development economics , political science , credit channel , economic growth , statistics , mathematics , computer security , law , computer science
This paper examines the extent to which monetary policy is manipulated for political purposes during elections. We do not detect political monetary cycles in advanced countries or developing nations with independent central banks. We do find evidence, however, in developing countries that lack central bank independence. Furthermore, we find some evidence that these cycles are not caused by monetization of election‐related fiscal expansions. This suggests that pressure by politicians on the central bank to exploit the Phillips curve may be an important factor in generating political monetary cycles.