Central bank independence and sacrifice ratios: Some further considerations

The existing literature reports a positive relationship between sacrifice r atios and central bank independence. This paper discusses two critical poin ts related to the usual procedures employed by this literature. One concern s the issue of non-stationarity of the inflation rate, the other the proble m of correlation between the error terms for different disinflation episode s in the same country. The way in which the sacrifice ratio-central bank in dependence relationship is tested is reconsidered taking into account these points. Our results shed considerable doubts on the nature and robustness of such a relationship and on the usual interpretation given to it in the l iterature.