THE INDEPENDENCE OF CENTRAL BANKS IN CENTRAL AND EASTERN EUROPE-A MONETARY POLICY STRATEGY BASED APPROACH

Abstract

The present paper aims to examine the trends of the last decade and a half of central banks independence (CBI) in Central and Eastern European countries on the road to the euro adoption and to compare the results with those identified in the case of the European Central Bank (ECB). We approached CBI from the perspective of monetary policy strategies central banks (CBs) use. The main results show increasing independence during the selected time frame for all monetary authorities subject to analysis, regardless of the applied monetary policy strategy; superior average levels of CBI in CEE countries oriented to inflation targeting compared to those using the exchange rate as nominal anchor; higher degree of independence of ECB in relation to monetary authorities that use an inflation targeting strategy; the simultaneous presence of a significant level of independence, low inflation and stronger economic development in CEE members where CB is geared towards inflation targeting compared to CBs that implement a strategy of exchange rate targeting.

Keywords

• CB independence
• CB governance framework
• monetary policy strategy
• Central and Eastern Europe