CAPITULO V.- DISCUSIÓN DE RESULTADOS
5.2. Contrastación de la hipótesis general en base a la prueba de hipótesis
C ountry ES policy type BP policy type In terp retatio n
effect C riterioneffect Australia 1 I 0 0 Belgium 3 2 +1 0 Canada 1 2 -1 0 France 2 2 0 0 Germany 5 4 0 +1 Italy 2 2 0 0 Japan 3 3 -1 +1 Netherlands 4 2 +2 0 Switzerland 5 4 0 +1 UK 2 2 0 0 US 3 3 -1 +1 Sweden 2 2 0 0 TABLE 2.12
The differences in the numerical values between the ES and the BP policy index are interpretation and criterion effects. The interpretation effects are caused by different
Measures of Central Bank Independence
interpretations of the central bank statutes. The criterion effect occurs because of ES's asymmetrical weighting of the attributes and the trade-off in BP's index between the criteria. Nevertheless, the ranking of the Bundesbank and the Bank of England does not change. The Bundesbank is classified by both indices as most independent, whereas the Bank of England ranks among the least independent central banks.
Eijffinger and Schaling made a valuable contribution to the empirical literature on central bank independence by constructing a new index of policy independence, based
on an asymmetrical weighting of the attributes, and also by delivering a critical
assessment of the existing indices of CBI.
2.6 A Broader Empirical Approach to CBI: Indices of Legal and
Actual Independence
A recent and very comprehensive study on central bank independence, comprising 72 industrialised and developing countries, was produced by Cukierman in 1992. He employs four types of indices of CBI and investigates their relation to the inflationary outcomes in the sample countries. The novelty in Cukierman’s analysis is the attempt to introduce indicators of actual independence in the empirical literature in order to give a deeper and more comprehensive insight into existing monetary regimes. The basic difficulty of measuring central bank independence lies in the multitude of factors involved for example, legal factors, most important in industrial countries, and cultural and personal factors, which determine the degree of independence, and are in their nature hard to quantify in numerical terms.
The four indices applied in Cukierman's study are one measure of legal CBI, derived from the central bank charters, and three indices of actual independence; (i) the rate of turnover of central bank governors, (ii) an index based on a questionnaire answered
by central bankers in 23 countries, and (iii) an aggregation of the legal index to the rate of turnover. The last measure is defined as “the fraction o f political transitions that are followed within six months by a replacement o f the central hank governor”.
The first three indices on the other hand “reflect, in the first place, the level o f independence that legislators meant to confer on the central hank”^^. Cukierman's caution concerning an analysis of central bank independence solely based upon legal aspects is twofold. “First, the laws are incomplete in that they cannot specify explicitly the limits o f authority between the central hank and the political authorities under the contingencies ... and second, even when the law is quite explicit, actual practice may deviate from it”^^.
2.6.1 Measures of Legal Central Bank Independence
Cukierman's analysis of legal central bank independence follows two principles, the application of only a few and narrowly defined legal characteristics and the use of only written information from the central bank constitutions, to determine the degree of independence. The legal characteristics are grouped into four clusters:
(1) appointment/dismissal procedure and the term of office of the chief executive officer (CEO)
(2) relationship between government and central bank concerning
policy formulation, the resolution of conflicts, and the role of the central bank in the budgetary process
(3) objectives of the central bank
(4) limitations on lending to the public sector.
Each cluster consists of different legal variables which are coded on a scale from 1 (most independent) to 0 (least independent). The result is an overall number of sixteen legal variables (Appendix
I).
The legal variables are weighted differently to indicate which ones are expected to lead to a greater autonomy for the central bank, Cukierman assigned the greatest significance for central bank independence to the35 Cukierman (1994, p. 1439) 3^ Cukierman el al. ( 1992, p. 355)
Measures of Central Bank Independence
first variable, the appointment procedure (weight of 0.20). This stands in contrast to Eijffinger and Schaling's view who assigned the greatest significance to the policy formulation, i.e. is the central bank the sole policy authority? The time frame used covers the four decades from 1950 to 1989, divided into four sub-periods: 1950-59, 1960-71, 1972-79, and 1980-89. Furthermore, Cukierman considered changes in central bank legislation over the period examined. W henever a change occurred within a decade, it was only considered when the changed legislation was in effect
during at least half of that decade. In order to obtain a hierarchy of indices, Cukierman aggregated the individual components of legal independence. The basic sixteen legal variables were aggregated into eight variables. The variables describing the appointment procedure and the term of office of the governor were incorporated
in a single variable, called CEO. The variables under policy formulation were also aggregated into a single variable. The objective variable was treated separately as well as the four first variables for limits on lending. The last four variables in this category were averaged with equal weight into a single variable. The final step in the aggregation procedure produced a single index for each country and decade, by aggregating again the eight variables obtained from the first round. The resulting index of legal central bank independence is similar to an index aggregated with equally weighted variables. Table 2.13 ranks the industrial countries according to their index of legal CBI for the period 1980-8937.
The central banks of Germany and Switzerland display the highest degree of independence and the lowest average rate of inflation. However, the results in the table do not demonstrate the existence of a clear-cut association between the average rate of inflation and the degree of central bank independence. Japan's central bank for example ranks at the bottom of the table, which indicates a high degree of dependence