ON THE ASSESSMENT AND IMPLEMENTATION OF INSTITUTIONAL REMEDIES

The most common approach to testing for the benefits of central-bank i ndependence is argued to be methodologically flawed for the reason tha t the measure of independence does not permit a test the hypothesis wh ich suggests that these benefits exist. Particular doubt is cast on th e merits of proposals to legislate to create independence. The argumen t is elucidated by comparison with the testing of a hypothesis about t he benefits of centralized and decentralized unions.