Financial crisis and central bank independence and governance (CBIG) in the Asia Pacific.

Abstract

This paper examines the impact of financial crisis on central bank independence and governance in 36 Asia Pacific countries. It constructs a unique CBIG index for fifteen years (1991-2005); which has an overall index and six sub-indices covering all the necessary aspects of central banking operations. These indices are ranked first to measure the relative positions of the central banks and then statistically tested their relationship with inflation, economic growth and financial crisis of 1997. It applies a panel data pooled regression model and finds a robust negative relation of CBIG with inflation; moderate positive relation with economic growth; and CBIG in post crisis period is significantly different from the pre-crisis period.