Central Bank Independence in Transition Economies

2. Empirical Works on Central Bank Independence 

Economic theory presented above emphasises the role of independent central 

bank in reducing inflationary bias. Empirical tests on this result require some 

judgement about unobservable central bank's independence. The first section of this 

chapter presents legal and behavioural indices of CBI. Early works concentrated on 

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Central Bank Independence… 

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legal aspects of independence, assuming that formal arrangements provide a 

reasonable proxy for an actual autonomy. Hence, legal indices of CBI are presented 

first. The actual independence may differ from that stipulated by law and behavioural 

indices, i.e., various measures of real CBI, are discussed next. Section two presents 

tests on the theory. Several works on the relationship between measures of CBI and 

inflation performance are discussed.