Measuring Central Bank Independence: A Tale of Subjectivity and

The paper first scrutinises the two indices of central bank independence (CBI) most commonly used in the empirical literature. It defines and discovers an impressive interpretation spread, a major criteria spread but a negligible weighting spread in those indices. Second, it eiamines the robustness of the empirical 'common knowledge' on the benefits of CBL It finds that, when rankings produced by various CBI indices are regressed with, among others, average inflation, 87.5 % of the regression coefficients are not statistically significant Third, following recent theoretical developments, it suggests an alternative approach to the measurement of a central bank's operational status. 1