Are central bank independence reforms necessary for achieving low and stable inflation?

Using data on the occurence of central bank independence (CBI) reforms in 131 countries during 1980-2005, we test whether they were important in reducing inflation and maintaining price stability. CBI reforms are found to have reduced inflation on average 3.31% when countries with historically high inflation rates are included. But countries with lower inflation have reduced it without institutional reforms granting central banks more independence, undermining the theoretical time-inconsistency case for CBI. There is furthermore no evidence that CBI reforms have helped reduce inflation variability.

Determinants and effects of central bank independence reforms

This thesis consists of four empirically oriented papers on central bank independence (CBI) reforms.    Paper [1] is an investigation of why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to control the economy. A new data-set, including the possible occurrence of CBI-reforms in 132 countries during 1980-2005, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country had been characterized by high variability in inflation and if they faced a high probability of being replaced. No such effects were found for OECD countries.    Paper [2], using a difference-in-difference approach, studies whether CBI reform matters for inflation performance. The analysis is based on a dataset including the possible occurrence of CBI-reforms in 132 countries during the period of 1980-2005. CBI reform is found to have contributed to bringing down inflation in high-inflation countries, but it seems unrelated to inflation performance in low-inflation countries.    Paper [3] investigates whether CBI-reforms are important in reducing inflation and maintaining price stability, using a random-effects random-coefficients model to account for heterogeneity in the effects of CBI-reforms on inflation. CBI-reforms are found to have reduced inflation on average by 3.31 percent, but the effect is only present when countries with historically high inflation rates are included in the sample. Countries with more modest inflation rates have achieved low inflation without institutional reforms that grant central banks more independence, thus undermining the time-inconsistency theory case for CBI. There is furthermore no evidence that CBI-reforms have contributed to lower inflation variability    Paper [4] studies the relationship between CBI and a suggested trade-off between price variability and output variability using data on CBI-levels, and data the on implementation dates of CBI-reforms. The results question the existence of such a trade-off, but indicate that there may still be potential gains in stabilization policy from CBI-reforms.

High female mortality resulting in herd collapse in free-ranging domesticated reindeer (Rangifer tarandus tarandus) in Sweden

Reindeer herding in Sweden is a form of pastoralism practised by the indigenous Sami population. The economy is mainly based on meat production. Herd size is generally regulated by harvest in order not to overuse grazing ranges and keep a productive herd. Nonetheless, herd growth and room for harvest is currently small in many areas. Negative herd growth and low harvest rate were observed in one of two herds in a reindeer herding community in Central Sweden. The herds (A and B) used the same ranges from April until the autumn gathering in October-December, but were separated on different ranges over winter. Analyses of capture-recapture for 723 adult female reindeer over five years (2007-2012) revealed high annual losses (7.1% and 18.4%, for herd A and B respectively). A continuing decline in the total reindeer number in herd B demonstrated an inability to maintain the herd size in spite of a very small harvest. An estimated breakpoint for when herd size cannot be kept stable confirmed that the observed female mortality rate in herd B represented a state of herd collapse. Lower calving success in herd B compared to A indicated differences in winter foraging conditions. However, we found only minor differences in animal body condition between the herds in autumn. We found no evidence that a lower autumn body mass generally increased the risk for a female of dying from one autumn to the next. We conclude that the prime driver of the on-going collapse of herd B is not high animal density or poor body condition. Accidents or disease seem unlikely as major causes of mortality. Predation, primarily by lynx and wolverine, appears to be the most plausible reason for the high female mortality and state of collapse in the studied reindeer herding community.