Central Bank Independence in the World: A New Data Set

ABSTRACT

This article introduces the most comprehensive dataset on de jure central bank independence (CBI), including yearly data from 182 countries between 1970 and 2012. The dataset identifies statutory reforms affecting CBI, their direction, and the attributes necessary to build the Cukierman, Webb and Neyapty index. Previous datasets focused on developed countries, and included non-representative samples of developing countries. This dataset’s substantially broader coverage has important implications. First, it challenges the conventional wisdom about central bank reforms in the world, revealing CBI increases and restrictions in decades and regions previously considered barely affected by reforms. Second, the inclusion of almost 100 countries usually overlooked in previous studies suggests that the sample selection may have substantially affected results. Simple analyses show that the associations between CBI and inflation, unemployment or growth are very sensitive to sample selection. Finally, the dataset identifies numerous CBI decreases (restrictions), whereas previous datasets mostly look at CBI increases. These data’s coverage not only allows researchers to test competing explanations of the determinants and effects of CBI in a global sample, but it also provides a useful instrument for cross-national studies in diverse fields, such as liberalization, diffusion, political institutions, democratization, or responses to financial crises.

KEYWORDS:

• Central banks
• central bank independence
• datasets
• measurement
• reforms

Acknowledgments

This data set was presented at the workshop “Monetary Policy and Central Banking: Historical Analysis and Contemporary Approaches,” at Princeton University, February 6–7, 2015, at the REPAL annual conference, Montevideo, Uruguay, July 2–3, 2015, and at the 57th ISA Annual Convention, Atlanta, March 16–19, 2016. I thank the participants at these events, David Bearce, Julia Gray, Brian Phillips, and the reviewers for their helpful comments. Marc Grau, Santiago Minor, María Fernanda Nieto, Mauricio Ochoa, José Manuel Toral, and Ludwig van Bedolla helped collecting legislation and coding different waves of data, and María Fernanda Porras provided excellent research assistance.

Supplementary Material

Supplemental data for this article can be accessed on the publisher’s website.

Notes

¹ The largest publically available original data set (Bodea and Hicks 2015b) includes only 2,314 observations (34.2% of this sample). The largest compilation of data sets, by Saleh (2011), including his own coding, has 2,714 observations (40% of this sample).

² Siklos (2008:803) suggests that data problems may even affect the definition of CBI because empirical studies usually define CBI “sufficiently loosely […] to fit the particular needs of the group of countries under investigation.” He attributes this to “the inevitable constraints imposed by the availability of limited data as well as variations in the quality of the data across countries.”

³ The IMF’s Central Bank Legislation Database (CBLD) is restricted to central banks and IMF personnel. Access to these data may help in completing or contrasting the sources used for this codification.

⁴ Arnone, Laurens, Segalotto, and Sommer (2007:39–40) include a table to convert CWN scores to the Grilli, Masciandaro, and Tabellini (1991) scale.

⁵ I obtained primary sources for 179 countries. I did not find primary sources to code the CWN components for three countries. However, I found reliable secondary sources to code the existence of reforms.

⁶ I coded 100 documents in Spanish, 47 in French, 34 in Portuguese, and seven in Italian. For Suriname’s and Turkmenistan’s legislation, I used automated translations.

⁷ Although the Panamanian National Bank is not strictly a central bank, other authors consider it possible to use its legislation to code its independence.

⁸ See the following.

⁹ When regional observations are excluded, the data set is 253% larger than Bodea and Hicks (2015b) and 270% larger than Sadeh (2011).

¹⁰ The online appendix shows the frequency of reforms per country and year.

¹¹ In the same two decades, Bodea and Hicks identify 17 reforms (nine of them increasing CBI). Of the 113 reforms I identify, 84 are in newly coded countries, and 29 in countries that were coded by Bodea and Hicks.

¹² The magnitude of the reforms also varies through the sample. In absolute terms, the average reform changes the index by .112 before 1989 and by .206 after that year. In relative terms, the average percentage change in CBI before 1989 is 40% (excluding Iran, a significant outlier) and 63% between 1990 and 2012.

¹³ Daunfeldt et al. (2013) coded central bank reforms in a sample of 132 countries during 1980–2005. Their data are not public, so these data come from their Figure 1 (Daunfeldt et al. 2013:431).

¹⁴ The substantive magnitude of the coefficient is larger in the middle- and lower-income countries.