TY - JOUR SN - 00142921 AU - Moser, Peter T1 - Checks and balances, and the supply of central bank independence JF - European Economic Review SP - 1569 EP - 1593 IS - 8 VL - 43 PY - 1999 U3 - PII: S0014292198000452 UR - https://doi.org/10.1016/S0014-2921(98)00045-2 AB - The paper analyzes the institutional conditions under which policymakers can credibly commit to an independent central bank and thereby mitigate the well-known time consistency problem in monetary policy. It is shown theoretically that granting independence via a statute is only credible for legislative systems with at least two heterogeneous decision-making bodies which both have veto rights (for example bicameral systems). This thesis is supported by empirical evidence: The legal independence of central banks is significantly higher in those OECD countries whose legislative processes are characterized by extensive checks and balances. Furthermore, the negative relation between legal independence and inflation is larger in countries with checks and balances than in countries without checks and balances. TS - CrossRef Y3 - 26.11.2021 M4 - Citavi ER -