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Authors
Advisor(s)
Abstract(s)
This dissertation examines Central Bank Independence from the perspective of the
Fiscal Theory of the Price Level, an expansion of Monetarism which emphasizes inflationary consequences of unsustainable public finances. Outsourcing monetary policy to
a technocratic institution free of political considerations is thereby understood as a fiscal
commitment to price stability, but not a guarantee thereof as it can still be undermined
by excessive government spending. By employing a new dataset on legal Central Bank
Independence, I estimate its impact on annual inflation with a panel data approach for 190
countries between 1970 and 2020, while also incorporating different measures on Fiscal
Sustainability. The existence of fiscal policy rules as well as Monetary Dominance are
found to be of dis-inflationary effect, whereas legal Central Bank Independence remains
statistically significant throughout. In fact, my findings suggest that operational and political autonomy of the monetary authority is crucial for price stability under almost all
circumstances.
Description
Keywords
Central Bank Independence The Fiscal Theory Of The Price Level Fiscal Inflation Fiscal Commitments Fiscal Sustainability Monetary Dominance
Pedagogical Context
Citation
Schöffthaler, Christof (2024). “Central bank independence as a fiscal commitment to price stability ”. Dissertação de Mestrado. Universidade de Lisboa. Instituto Superior de Economia e Gestão.
Publisher
Instituto Superior de Economia e Gestão