Browsing by Author "Mendes, Bruno Lopes"
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- Independence and crises : how central bank independence is affected by financial crisesPublication . Mendes, Bruno Lopes; Correia, Isabel HortaThis study examines the impact of different types of financial crises—banking, debt, and currency—on changes in Central Bank Independence (CBI), revealing that the effects vary depending on the crisis type. Using data on financial crises and central bank independence, this analysis introduces an innovative approach that accounts for the duration and dynamics of crises. Banking crises are found to reduce independence, particularly in areas such as the formulation of monetary policy, the institution’s financial independence, and a shift away from focusing on price stability. In contrast, currency and debt crises generally enhance CBI. Currency crises primarily strengthen independence in monetary policy formulation, the institution’s financial independence, reporting responsibilities, and restrictions on lending to the government. Debt crises, on the other hand, increase reporting responsibilities, reinforce the central bank’s focus on price stability, and introduce additional restrictions on government lending. These findings underscore the pivotal role of financial crises in reshaping central banks. Understanding how central banks adapt and respond to financial crises is crucial for explaining their current roles, the evolution of their mandates, and the reasons behind their growing independence and responsibilities over time.