Determinants of inflationary performance: Corporatist structures vs. central bank autonomy

Abstract

Studies by economists have shown that countries with autonomous central banks experience lower inflation than others. (Banian, Laney and Willett, 1983; and Bade and Parkin, 1987). One reason for this may be that countries with autonomous central banks are less likely to monetize their deficits (Burdekin and Wahar, 1990). Studies by political scientists have used measures of the strength of corporatist structures to explain macroeconomic outcomes. (Cameron, 1984). However, neither economics nor political science research has employed measures of both central bank autonomy and the strength of corporatist structures to explain comparative inflation rates. The present paper tests whether measures of corporatist structures and central bank autonomy explain the comparative inflation performance of eighteen industrialized countries. This issue is of great importance for students of piecemeal monetary reform in countries where the central banking structure is susceptible to reorganization. The results of this paper should inform parties who are active in the reformation and reorganization of central banks in lesser developed and nascent market economics throughout the world.