Abstract
ABSTRACTWe examine whether the autonomy of a country's central bank (CB) reduces the probability of a banking crisis. We take a fine‐grained approach to CB autonomy by disentangling its various components as well. In addition, we look at the joint effects of CB autonomy and the legal tradition on the probability of a banking crisis in a country. Using the cross‐country data for CB independence for the period of 1980–1989, and both binary and ordered logit estimation models, this study finds that a country's CB with more autonomy in aggregate can lessen the probability of a banking crisis. When the CB's autonomy is disentangled with respect to its responsibilities, this study finds that the longer the tenure of the CB's chief executive officer, the lower the probability of a banking crisis. We also find that the probability of a banking crisis in the country is reduced even more if the relatively more autonomous CB can perform its duties in line with the country's stronger law‐and‐order tradition. We also carry out some counterfactual thought experiments along these lines. Copyright © 2011 John Wiley & Sons, Ltd.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
