Why are price stability and statutory independence of central banks negatively correlated? : the role of culture
This paper investigates whether in OECD-countries the negative relation between central bank independence and inflation is related to culture, in the sense of common values and norms. It appears that inflation is lower in countries where people dislike uncertainty. The tolerance in a society with regard to inequality in power and wealth and in centralization of authority is correlated with central bank independence and to a lesser extent with inflation. Countries, where inhabitants perceive that there should be an order of inequality and a centralisation of authority, are characterised by a dependent central bank and relatively high inflation rates. Hence, the national attitude towards inequality among people is the third factor explaining the negative correlation between inflation and the degree of central bank independence.
Year of publication: |
2001
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Authors: | Jong, Eelke de |
Institutions: | Faculteit Economie en Bedrijfskunde, Rijksuniversiteit Groningen |
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