Central bank independence and inflation: Corporatism, partisanship, and alternative indices of central bank independence

A well-developed theoretical literature suggests that central bank independ ence causes low inflation. Empirical work supporting this hypothesis is uns atisfactory, however, for two reasons: statistical analysis has only recent ly begun to include control variables, and important political variables th at are related to inflation have not yet been included; analysis has not ye t undertaken a systematic comparison of alternative indices of central bank independence. This paper addresses both weaknesses by testing the explanat ory power of eight indices of central bank independence in a political-econ omic model of inflation. The results suggest that while support for the cen tral bank independence hypothesis survives a relatively inclusive set of co ntrol variables, support for the hypothesis is not independent of the parti cular index upon which analysis relies.