Central bank independence during the Interwar period and its effects on inflation and Growth

Les effets macroéconomiques de l’indépendance des banques centrales pendant l’Entre-deux-guerres

Eric Dehay (1) , Nathalie Lévy (2)

1 RIME-Lab - Recherche Interdisciplinaire en Management et Économie Lab - ULR 7396
2 IRJI - Institut de recherche juridique interdisciplinaire

This article recalls the central banks independence experience during the interwar period. As in Cukierman, Webb et Neyapti (1992), we built a legal index and measured the governors’ turnover rate for eighteen central banks. We then tested the relation between these two indexes and the inflation or growth performances. Some results differ from those usually obtained for more recent periods. There is a significant inverse relation between independence and inflation performances only for the sub-period 1929-1938. An inverse relation between independence and growth performances is also observed for the sub-period 1923-1932, when independence level was at its highest.

Keywords: central banks independence

Domains: Humanities and Social Sciences

Eric Dehay, Nathalie Lévy. Central bank independence during the Interwar period and its effects on inflation and Growth. 2004-12, Institut Caisse des Dépôts et Consignations pour la recherche - Rapport final. 2004. ⟨hal-03951998⟩