Central bank independence, growth, investment, and real rates

Alex Cukierman*, Pantelis Kalaitzidakis, Lawrence H. Summers, Steven B. Webb

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper uses new measures of central bank independence (CBI) for a sample of up to seventy countries in order to investigates the effect of CBI on growth, private investment, productivity growth, and the variability (over time) of growth, controlling for other variables. The proxies for independence are an aggregate index of legal independence based on sixteen specific features of the central banks' charters and the average turnover rate of central bank governors. The paper also addresses the issue of simultaneity between growth and inflation by using an index of political vulnerability of the central bank. This index is the fraction of political transitions which are followed, within a short period of time, by a replacement of the governor of the central bank. A main finding of the paper is that CBI has a positive effect on growth in LCDs (less-developed countries) and no effect within industrial countries. The paper also presents evidence on the relation between CBI and the distribution of interest.

Original languageEnglish
Pages (from-to)95-140
Number of pages46
JournalCarnegie-Rochester Confer. Series on Public Policy
Issue numberC
StatePublished - Dec 1993


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