Central Bank Autonomy in Mexico / Volume IV: Echoes From Abroad
Author: Eduardo Turrent
Date: 2015-11-13T06:00:00+00:00
Publisher: Banco de México

Central Bank Autonomy in Mexico

A Historical Overview

Volume I

The Central Banking System in the World

Agustín Carstens

Governor

Roberto del Cueto Legaspi
Manuel Ramos Francia
Manuel Sánchez González
José Julián Sidaoui Dib
Deputy Governors

BANCO DE MÉXICO

EDUARDO TURRENT
Project supervision

AÍDA GARCÍA DIMAS
Historical research and project coordination

ANTONIETA CRUZ
Editorial coordination

ANTONIETA CRUZ
GERMÁN GÓMEZ
Iconographic research

NOSTRA EDICIONES
Editing, design, and prepress

SANDRA FERRER ALARCÓN
Graphic and editorial design

LUCERO VÁZQUEZ TÉLLEZ
ROSALINDA RESÉNDIZ PADRÓN
Graphic design

GREGORY DECHANT
Translation

MARÍA ESPERANZA ZOREDA LEE
Translation oversight

LIDIA CASTRO RAMÍREZ
Text transcription

LUIS EKIRO
GERARDO PEÑA TORRES
Banco de México images 2012

We would like to thank the following institutions for their support:
Sistema de la Reserva Federal
Banco Central de Chile
Centro de Estudios Monetarios
Latinoamericanos, CEMLA

Banco de México:
Oficina de Acervo Numismático
Subgerencia de Coordinación de Archivos
Subgerencia de Numismática y Comercialización

The reproduction of the images of banknotes used to illustrate the present work has been authorized by the Secretaría de Hacienda y Crédito Público (official authorization UBA/DGABM/1339/2005, dated November 2005).

First edition, 2012

All rights reserved

BANCO DE MÉXICO
Avenida Cinco de Mayo 2
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Delegación Cuauhtémoc
06059, México, D.F.

IEBN: 484-132-000005-28

Printed in China

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Echoes From Abroad

A Liberalizing Current

The historical trend of the late 1970s and early 1980s shows a lapse in social and economic revolutionary movements throughout the world. In 1978, Deng Xiaoping took the first steps toward modernizing the communist economy in a country containing one-fifth of the world’s population. Deng’s actions were to transform China in just two decades from a closed, backward country into a dynamic regional pole with a growth rhythm unprecedented in the annals of civilization. Radical transformations also took place in the United States. A relatively little-known figure, Paul Volcker, was appointed head of the Federal Reserve under the banner of implementing a new vision of monetary policy. On the other side of the Atlantic, Margaret Thatcher occupied 10 Downing Street with a novel mandate: to face up to the power of the trade unions and pull Great Britain out of the stagflation into which it had fallen for a long decade. In 1980, Ronald Reagan was elected president of the United States and he also announced a singular new economic strategy. Of course Reagan was sympathetic to the stabilizing efforts of Volcker, but he added his own prescription of private-sector-friendly policies aimed at reactivating the sluggish American economy.

It was a far-reaching international movement. Transformations of such scope and depth are not produced by chance. What was behind figures such as Deng Xiaoping, Volcker, Thatcher, and Reagan to make them formulate a new economic strategy? One factor, already mentioned, was the unsatisfactory performance of their economies and the need to do something in the way of renovation. Another decisive factor was the effect of imitation. In China, Deng had been witness to a dizzying increase of wealth in Japan and other East Asian countries. Japan and South Korea had achieved the miracle of transformation on the basis of market economy formulas.

In order to revitalize productive forces the concept of individual freedom also needed to be vindicated. The best way of fostering the common good was by not restricting the natural development of human abilities and market freedoms. According to this doctrine, the institutional framework of the economy was to be characterized by well-defined and well-protected property rights, competitive markets, and freedom to trade and produce. The state’s fundamental role was to protect this institutional framework so that market competitiveness could be maintained and increased. In this context, the state was expected to ensure that laws were respected and that public goods and services, which the private sector was unable to supply, be provided to citizens.

A highly illustrative instance of this renovating current can be seen in Great Britain starting in 1979. The general elections held in May of that year brought a new proposal of reform, under the leadership of Margaret Thatcher, to power. Her government proposed a totally different economic policy from the one previous governments had been following. And Thatcher’s electoral victory had not occurred by chance. In British society there was widespread dissatisfaction with the performance of the economy and a general impression that the policies followed up to then had not been enough. Once in power, the Thatcher government offered a very new menu of economic policies to the British electorate. An initial priority was the reduction of inflation, in order to provide an opportunity for self-sustained growth. Also, through lower taxes and more limited public spending, Thatcher hoped to catalyze the economic forces of the private sector. The privatization program would provide stimuli in two areas: it would put stagnating companies into private hands and give the ordinary British citizen the possibility of becoming the owner of a home or a partner in productive enterprises.

Although Thatcher’s critics have insisted that her policies were ill-defined, incoherent, and badly implemented, there is no doubt in retrospect that the British economy was in need of a new strategy. The problems of chronic inflation, industrial stagnation, insufficient competiveness, low productivity and general disaffection were all too evident. Also, Thatcher’s election brought healthy new ideas of reform and change into the political debate. There were signs of optimism and renewal in the new political rhetoric that had been absent for many decades in British political life.

In technical terms, the differences between the economic policy of the Thatcher government and that of her predecessors were of three kinds. Most important was the priority given to conquering inflation through exclusively monetary instruments. This was a far cry from the ideas previously in vogue, which called for wage and price controls. The second big difference was the emphasis placed on supply-side economics. Incentives to work, save, and invest would be reinforced by lower income tax, which could in any case be compensated by consumer taxes. The final fundamental difference was the redefinition of the size and scope of the public sector in the British economy. Perhaps the most respected aspect of the Thatcher government’s economic strategy was the privatization program it carried out.[1]

A trend toward market economy ideas began to spread around the world. In China, the main proponent of this current was visionary leader Deng Xiaoping.

At the time, no one imagined that Thatcher’s government had in its portfolio a privatization program of companies of such dimensions and coverage as it finally carried out. All the actions performed on that front both astonished and impressed the communications media. Moreover, the program was not simply a matter of ideological firmness, accurate diagnosis, and political decisiveness. There was as much or more political determination behind Ronald Reagan when he was elected president of the United States in 1980. But in Great Britain there was the important circumstance that during decades of statist economic policy a series of Labour governments had created a vast network of state-run companies. The extensive privatization program was only possible because the hypertrophied sector of state-run entities was there, an enormous liability weighing down the government. Another aspect of the matter was communication. The term “privatization” coined by the Thatcher government contained within itself a strong semantic charge. The word itself was so attractive that the government gained a political triumph just by creating it.[2]

The British privatization program was necessarily gradual. The strategy was not announced openly until the 1979 budget speech by Chancellor of the Exchequer Geoffrey Howe. But once the program had been made public, actions were carried out with speed. In 1980 the oil giant British Petroleum was sold, followed by the industrial consortiums British Aerospace and Cable & Wireless during the next two years. Between 1981 and 1986 the Thatcher government put up for sale and successfully transferred to private hands six important firms in the energy sector. Sales of companies in the industrial sector began in 1984 and continued for the rest of the decade. These included firms as prestigious and well-known as the automobile manufacturers Jaguar and Rolls-Royce, the airline British Airways, and the corporation that administered Great Britain’s airports. Finally, in the course of 1989 and 1990, British Gas (in the energy sector) and British Steel, Water plcs and Rover (in the industrial sector) were privatized.[3]

The comprehensive and very effective privatization program undertaken in Great Britain by the Thatcher administration involved British Petroleum, Rolls-Royce, and dozens of state-owned companies that had bloated that country’s public sector.

To the surprise of many, in the United States the movement toward a vindication of the market economy began when Jimmy Carter was still president. It was Carter who appointed Paul Volcker to head the Federal Reserve. It was also during Carter’s administration that Volcker began to implement a strict monetary policy in order to root out the seeds of inflation in the U.S. economy. And it was under Carter that programs began to be implemented to deregulate the airlines and the highway freight industry. The arrival of the Republican Ronald Reagan at the White House signified a confirmation and expansion of this pro-market focus. As soon as he was sworn in, Reagan announced the main operational lines of the economic strategy he had in mind: lower taxes, public spending cuts, deregulation of the main economic sectors, and encouragement of business ventures. The idea was not to eliminate the State, but to streamline it and make it more efficient.

After a long decade of stagflation, the goal of the Reagan administration was to restore the capacity for growth of the U.S. economy. Formulated with this end in mind, “Reaganomics” rested on four principles. The first was to support business as the fundamental motor force of the market economy. The economic efforts of the business sector not only expanded production but also generated the technological development indispensable to innovation and improvements in productivity. Hence the advisability of ensuring that taxes and regulation of economic activities would not inhibit the creative efforts of businesspeople. The third pillar of Reaganomics was the promotion of market competition. The fourth principle consisted of fostering the dynamism that derived in fact from the confluence of the previous three aspects: business activity, government support, and healthy market competition.[4]

Reaganomics coincided with Thatcherism in its conviction that the only viable path to economic development was a return to the values of Adam Smith. The two administrations also agreed about reducing government participation in the economy and adopting an energetic strategy to eradicate inflation. What distinguished Reaganomics was that it drew on a strong body of economic thought, formulated by the proponents of so-called supply-side economics, which the Reagan administration embraced without hesitation. Supply-side economics was presented as an alternative to the discredited Keynesian policies, which emphasized stimuli on the demand side and were identified with the stagnation of the previous decade. Arthur Laffer popularized the thesis that excessive tax rates could be expected to lead to a reduction in total tax collection.[5]

In continental Europe the restoration of “market-oriented” economic policies was closely associated with the economic integration of the countries of the region. As is well known, the culminating moment of this process was the signing of the Maastricht Treaty in February 1992, but the origins of the European Economic Community dated back to the years following the Second World War. The Benelux Customs Union, which went into effect in 1948 and included only three countries —Belgium, the Netherlands, and Luxembourg— outlined four stages for the economic integration of the region: customs union, suppression of quantitative restrictions and exchange controls, freedom of movement for the factors of production, and economic union. Once the idea of multi-sector integration had been abandoned, the next proposal to prosper was a treaty for the continental steel industry. This important agreement was enshrined in 1951 in the establishment of the European Coal and Steel Community. Meanwhile, countries opposed to continental integration —with Great Britain at the head, and including Denmark, Portugal, Austria, Sweden, and Norway— signed the European Free Trade Association in 1959.[6]

The Treaty on European Union would come to be known as the Maastricht Treaty because it was signed in the city of Maastricht in the Netherlands. The treaty is structured around three pillars. The central or “communitarian” pillar deals with concepts and institutions of supranational scope, such as the common market, economic union, and structural and cohesion funds. The other two pillars, described as “lateral,” do not involve supranational instruments but rather cooperation amongst the governments of associated countries. Seen in their true light, the Maastricht convergence criteria for countries aspiring to join the European Economic Community were no more than a catalogue of policies essential to a viable market economy, which is to say, an economy with basic macroeconomic equilibriums. Thus, in the ambit of stability, the criteria called for countries requesting membership to have annual inflation rates no higher than 4.5%. In the area of public finances, requirements included a budget deficit of no more than 3% of GDP and a ratio of public debt to GDP of less than 60%. The country’s foreign exchange rate was not to have undergone a variation of more than 15% in the previous two years. And finally, average interest rates were not to be above 6.5%.[7]

In the United States Ronald Reagan became the champion of market economy policies. In order to restore price stability, he maintained the dynamic and determined central banker Paul Volcker at the head of the Federal Reserve.

In the years following its establishment, the number of countries that adhered to the European Economic Community increased significantly. An important expansion took place in 1995, when Austria, Finland, Sweden, and Norway joined create the “Europe of the Fifteen.” This torrent of adhesions continued over the following years, with the result that, by the time the Growth and Stability Pact was signed, the European Union was made up of 27 nations. The Growth and Stability Pact was proposed by German Finance Minister Theodor Waigel in the mid-1990s, with a view to reducing the possibility that governments of the zone could adopt expansionist or destabilizing economic policies. Adopted in 1997, the Pact was drawn up on the basis of Articles 121 and 126 of the Treaty of the Functioning of the European Union. The idea was that the European Commission and the Council of Ministers could monitor the fiscal situations of countries in the Union in the light of Maastricht criteria and would even be authorized to issue warnings and impose sanctions.

In the wake of the fall of the Berlin Wall, the breakup of the Soviet Union, and the disappearance of communism in the former Soviet Bloc, the countries of Eastern Europe began to adopt the institutions and practices of the market economy. The transition was often traumatic, but the countries of the former Communist Bloc really had no alternative. After years in which there were literally no consumer goods available, or only ones of very poor quality, families in these societies began to have access to imported goods. The phenomenon had two repercussions. First of all, it bankrupted domestic producers of these kinds of goods, and second, it made entrepreneurs engaged in the importation of consumer goods immensely wealthy. It was the beginning of a drastic change in the distribution of wealth in these countries.

The signing of the Maastricht Treaty led to the creation of the European Economic Community and to the establishment of a continental institution: the European Central Bank.

But the fundamental point is that the countries of Eastern Europe had no choice but to turn to the market economy. The process of adaptation was gradual. One line of action consisted of a prolonged effort to reach a legal definition of property rights. Another parallel task involved the privatization of productive units which a bankrupt State needed to get rid of. And there was a need for a tax system that corresponded to the new economic organization. Tax revenues would have to suffice for the financing of public spending but at the same time tax rates should be reasonable enough to avoid suffocating the efforts of the newly formed entrepreneurial class. Another fundamental need was for the government to help in creating functional and sufficiently competitive markets. Fortunately, a fairly well-qualified workforce, which had labored in obsolete plants during the communist years, was able to adapt to the new circumstances, which included workers offering their services to foreign companies newly installed in the country as a result of foreign investment.

The 1970s had been marked in Latin America as well by serious economic problems, consisting not only of stagflation but also by debt crises. Disenchantment with the statist and expansionist (i.e. Keynesian) policies that had been applied with such prodigality led to a search for an alternative. This was found in the market economy and came to be known as the Washington Consensus. In fact, economic debate and the design of economic policy in Latin America already showed a clear trend toward a market focus. But the term “Washington Consensus” can be traced to a specific origin. In 1989 John Williamson of the Peterson Institute for International Economics organized a congress of distinguished Latin American economists to discuss the changes that economic policy had undergone in recent years in their respective countries. The various contributions were gathered into a volume and Williamson decided to refer to their common focus, summarized in ten points, as the “Washington Consensus.” Since then, the phrase has been treated in certain quarters as something of a “war cry.”[8]

An impartial and objective reading of the controversial ten points reveals, however, a very reasonable list of economic policy prescriptions. The first, which calls to fiscal discipline, had to do with avoiding the large fiscal deficits that had been generated for many years in various Latin American countries. These deficits had led to the debt crises of the 1970s and were to some extent responsible for the high inflation which would later become a deplorable hallmark of Latin America. No less reasonable was the second point, which called for a reordering of public expenditure priorities. If public finances needed to be cleaned up and the potentialities of public spending released for growth, some such reorganization was in order. The proposed tax reform of the third point derived from the need for a broad tax base and moderate marginal tax rates which would not stifle incentives for economic agents. The deregulation of interest rates was proposed in order to prevent financial repression and foster agile and functional financial markets. By contrast, the call for “competitive exchange rates,” particularly dear to Williamson’s heart, seems rather old-fashioned and anachronistic in the light of the later consolidation of floating exchange rate systems.

As regards the structural proposals of the Washington Consensus, the trade liberalization which seemed so much a part of the vanguard at that historical moment had already been put in place in Mexico by the government of President Miguel de la Madrid, through the country’s adhesion to the General Agreement on Tariffs and Trade (GATT) in 1985. The liberalization of direct foreign investment called for by the Consensus was a challenge to certain countries, especially in South America, which had a long tradition of carefully controlling these inflows. The recommendation of deregulating the goods and services markets was already very familiar from the experiences of the Thatcher and Reagan governments in Great Britain and the United States. In any case, this strategy made a lot of sense in Latin America, with its long tradition of market overregulation. The implementation of a privatization program sounded heretical to the ideological ears of Latin American idolaters of statist control, but it was a strategy that had already begun to be followed, by necessity, since 1983 in Mexico. Finally, inspired by the writings of the highly original Peruvian thinker Hernando de Soto, the Washington Consensus called for “legal security for property rights.” In some Latin American countries, this was seen as a way to grant property, especially real estate, to the informal sector of the economy.

Closely identified ideologically, U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher.

It is one thing to formulate an economic strategy but quite another to implement it successfully. By economic logic and the nature of its ends, the Washington Consensus stood up to critical analysis of the most demanding kind. In fact, when the proposals were correctly implemented, they tend to produce positive results relatively quickly. In Mexico, for example, there was no one who dared to suggest that the companies privatized by the government of Miguel de la Madrid be returned to ownership by the public sector. Nevertheless, in the heated controversy surrounding the prescriptions of the Washington Consensus, it has tended to be difficult to separate questions of logical consistency from those of feasibility of implementation. A defective implementation might in fact render ineffective a policy which in other circumstances would be viable and functional. This is what has occurred when privatization programs are carried out in a corrupt way or when privatized companies begin to operate in market structures flawed by monopolistic practices or other functional defects.

New and Restored Autonomies

In the 1990s there was a worldwide trend toward central bank autonomy. Five or six decades before, the inverse process had taken place, as many central banks around the world were nationalized or subjected to state control. Without this previous evolutionary process, the reverse trend would not have had the force or qualitative impact that it did. Of course the wave of nationalizations did not include all the central banks in the world. In the United States, for example, the Federal Reserve retained and even strengthened its independence during the 1950s. Nor did the famous West German Bundesbank see its independence diminish, though it was actually established after the aforementioned wave of nationalizations. Whereas the Bank of England was put under state control in 1946, its West German counterpart was not founded until a decade later. In fact, the process of nationalizing central banks had begun before the Second World War.

There were just a handful of state-controlled central banks in 1940. These included of course the central bank of the Soviet Union, a country with a centrally planned economy. But the same could be said of the economies of Sweden, Finland, Bulgaria, Uruguay, Iceland, Australia, China, and Iran. Between 1936 and 1945 the central banks of Denmark, Canada, New Zealand, Bolivia, and Guatemala were placed under state control. During the same period state-owned central banks were established in Ireland, Poland, Thailand, Ethiopia, Costa Rica, Paraguay, Nicaragua, and Afghanistan. The process continued after the war, as central banks in Great Britain, France, Holland, Norway, Czechoslovakia, Yugoslavia, Hungary, Rumania, Argentina, India, Indonesia, Egypt, Spain, El Salvador, and Peru were all stripped of their autonomy.[9]

There were powerful forces driving this widespread evolutionary process. One of them, political in nature, was the emergence of groups with strong leftist sympathies in the Western liberal democracies. State planning and other centralized economic policies became fashionable and the notion of an autonomous central bank was hardly consistent with such views. According to the new outlook, economic policies needed to be fully coordinated and the control of the government was essential to achieving this end. In line with prevailing interpretations of Keynes’s thought, the instrument of state intervention par excellence was fiscal policy. Monetary policy was a much less effective tool, considered insufficient to exercise any real influence on interest rates. The governments that had embraced these views wanted low, stable interest rates and believed they could be attained through administrative controls. It was also believed that the destabilizing effects on the balance of payments could be limited through restrictive regulatory measures.[10]

According to some scholars, the historical development of the central banking system has been cyclical, characterized by periods of boom and bust in terms of autonomy. The renewed flourishing of autonomy among central banks in the 1990s was part of a larger process. On the one hand, it was part of a wave of market-oriented economic reforms, in which the independence of central banks played an important role. The other driving force, along somewhat parallel lines, was the evolution of the operating tools of central banks, a process so important that it has been described by one scholar as a “quiet revolution.” For Alan Blinder, this “revolution” involved the modernization of the central banking system, through a focus on three aspects of its functioning: first, transparency in operations; second, the importance of decision-making by committees; and third, the independence of the central bank from money, capital, and exchange markets.[11]

As a trend, the movement toward central bank autonomy took place mainly between 1990 and 2000 and involved 71 countries. These included 17 countries from Eastern Europe and the former Soviet Bloc, all of which approved legal changes to give greater autonomy to their respective central banks. There were also smaller groups of countries in Western Europe (13), Latin America (11), Africa (9), and Asia (4). The Latin America countries that carried out the reform were Argentina, the Bahamas, Bolivia, Chile, Colombia, Costa Rica, Honduras, Nicaragua, Peru, Uruguay, and Venezuela. In the Asian group, it was South Korea, Japan, Indonesia, and the Philippines that made their respective central banks autonomous. According to Simone Polillo and Mauro Guillen, the researchers from whom the foregoing information has been taken, only 24 countries that in 1989 did not have an independent central bank failed to carry out a change of some kind in the period studied. Polillo and Guillen add that only one country, Malta, took measures to reduce the autonomy of its central bank.[12] By contrast, after the historic collapse of the Bretton Woods system, only eight countries made reforms to their central banks. Chart 1 shows the evolution of the process during the decade in question.

In another study led by the well-known Turkish-American economist Daron Acemoglu, out of a sampling of 51 central banks in which autonomy had been strengthened, just over 15% of them were Latin American cases. As the pioneer in South America, the Bank of Chile was the only central bank to gain its autonomy before the 1990s, but just barely (in 1989, to be specific). Between 1990 and 1994, the central banks of El Salvador, Argentina, Colombia, Ecuador, Nicaragua, Venezuela, Mexico, and Peru all became autonomous, in that order. Between 1995 and 2000 autonomy was granted to the central banks of Paraguay, Bolivia, Costa Rica, Uruguay, and Honduras. Since 2000, the only cases have been Brazil (2000), Guatemala (2002), and the Dominican Republic (2002), though in the case of Brazil autonomy was not granted to the central bank through the enactment of a new law.[13] It is noteworthy, finally, that the autonomy of the central banks of Ecuador and El Salvador was approved only after the implementation of a much more radical system, in the form of dollarization, which relegated the central bank to a purely administrative role.

On the world stage, the first example of newly achieved autonomy was that of the central bank in New Zealand. Although the reform was almost contemporary with that of the Central Bank of Chile, the case of New Zealand, perhaps from linguistic affinities, has attracted more attention in the English-language scholarly literature. Academic attention apart, the experience of the central bank in New Zealand had the same starting point as that of its counterpart in Chile: the subordination of the institution, and consequently of its monetary policy, to the government, through the Ministry of Finance. This was particularly the case in New Zealand through the 1970s and 1980s. The regulatory framework had been created by an amendment to the Reserve Bank of New Zealand Act of 1964, whereby the Ministry of Finance was empowered to inform the central bank periodically of the monetary policy to be followed, which was to be aimed at “the maintenance and promotion of economic and social welfare in New Zealand, having regard to the desirability of promoting the highest level of production and trade and full employment, and of maintaining a stable internal price level.”[14] In these legal and operational circumstances, the macroeconomic performance of New Zealand through the 1970s became increasingly volatile.

The panorama began to change when the Labour Party won the 1984 election. The new Finance Minister, Roger Douglas, was a recent convert to free market ideas and it was through his influence that the statist and interventionist measures of the previous government began to be reversed. The first step was to abandon the artificially fixed exchange rate, which was allowed to float in accord with market forces. Then controls and restrictions were removed from interest rates, bank liabilities, and international capital inflows. As a result of these measures, there was initially a strong upsurge in inflation, but as the currency strengthened and interest rates rose, boosted by market forces, by 1987 the inflationary pressures began to recede.

This was the context in which important reforms for the central bank began to be carried out. The guiding force continued to be the Labour Finance Minister Roger Douglas. It was in March 1986 that Douglas met with the Board of Directors of the Reserve Bank of New Zealand and Governor Spencer Russell to discuss a legislative reform designed to grant autonomy to the institution and give it a larger role in the formulation of economic policy. Shortly thereafter, Douglas spoke in Parliament about protecting the central bank, offering “to make certain that no future politician [could] interfere with the Bank’s primary objective of ensuring price stability, or manipulate its operations for their own purposes, without facing the full force of public scrutiny.”[15]

The process generated an intense controversy in the country involving several head-on collisions between the Ministry of Finance and the Reserve Bank of New Zealand. During the first round, the Ministry floated the idea of transforming the central bank into a state entity like the railways and Air New Zealand. A subsequent proposal was to turn the central bank into a generator of revenues and try to maximize profits. These proposals forced the management of the central bank to react. It called on the support and advice of a well-known expert in the area who was on the faculty of the London School of Economics: Charles Goodhart. Backing the side of the central bankers, he suggested that their counterparts at the Ministry of Finance were still trapped in the debates of the 1840s. Goodhart’s support had the desired effect and two basic points were agreed upon: independent monetary policy determined by specific goals, accompanied by transparency and a proper rendering of accounts.[16]

What were the main outlines of the new Reserve Bank of New Zealand Act? The most salient feature was the single goal set for the central bank: the achievement and maintenance of the stability of general price levels. Another element was that the Governor of the bank —the institution’s highest authority, who was solely responsible for results— was to sign jointly with the Minister of Finance a Policy Targets Agreement at the beginning of his mandate. Once the agreement was signed the central bank would be at complete liberty to choose and implement the policies deemed most suitable to achieving the goals agreed upon. It was in this operational freedom that the autonomy granted to the institution largely resided. The performance of the Governor would be evaluated on the basis of the Policy Targets Agreement. In the event of a national emergency, the government could suspend the Agreement and even with the Agreement in effect, the Governor could be summoned to provide explanations about monetary policy and his achievements to a parliamentary committee formed to follow up on the central bank’s performance.

The 1990s were just beginning. The organization proposed for the Reserve Bank of New Zealand displayed innovations that attracted the attention of scholars and academics. The law made a distinction between the setting of policy goals and operational autonomy, anticipating academic work on this subject by several years. Of similar interest was the contractual element incorporated into this institutional arrangement. According to several authorized sources, the Reserve Bank of New Zealand was one of the most independent central banks in the world in the 1990s and of the greatest interest to analysts in the field. The key intention in the New Zealand reform, in terms of political economy, was to erect a protective mechanism for the central bank, in order to prevent the bank from being subordinated to short-term bureaucratic interests. The law was a carefully balanced combination of local experience, pragmatism, and attention to the most advanced theoretical work in the field.[17]

During the 1980s, the Reserve Bank of New Zealand was one of the first central banks to recover the autonomy it had been stripped of years before.

Particularly revealing about this historical conjuncture in favor of central bank autonomy was the case of the Bank of England. It is curious that it was the Labour Party, in the aftermath of the Second World War, that stripped the doyen of all central banks of its independence, only for another Labour government to restore that safeguard, half a century later, to the prestigious institution on Threadneedle Street. The Thatcher government always harbored doubts, though they were not shared by Nigel Lawson, who served as Chancellor of the Exchequer in Thatcher’s cabinet in the second half of the 1980s. With determination, Lawson submitted a proposal to Thatcher to give back the central bank its independence and so ensure price stability in Great Britain. In 1989, after his proposal had finally been rejected, Lawson resigned from the government.

A similar proposal was submitted to the government of John Major, prepared in the context of the great crisis provoked by the devaluation of the pound sterling and its withdrawal from the European Exchange Rate Mechanism. This exchange rate debacle was deeply damaging to the credibility of British monetary policy. It was now the turn of Norman Lamont, the Chancellor of the Exchequer under John Major, to submit a proposal which in essence mirrored that of Nigel Lawson several years before. The purpose of granting autonomy to the central bank was to restore confidence in the pound sterling and in the government’s monetary policy. Prime Minister John Major rejected the project, but for different reasons than Thatcher. With debate over a European monetary union raging on the continent, many skeptics on the other side of the Channel viewed the proposal as a sort of conspiracy aimed at getting rid of the pound and replacing it with the common currency of the Eurozone.

The opposition Labour Party began to get interested in the same subject and initiated discussions with experts and academics specializing in central banking. The reason was clear and had a practical basis: the Labour Party had always borne the stigma of being responsible for high inflation. So the future Chancellor of the Exchequer Gordon Brown got in contact with Donald Brash of the Reserve Bank of New Zealand and Alan Greenspan of the Federal Reserve. Unknown to the Conservatives, and even to the Bank of England itself, a Labour Party plan was being prepared to restore the autonomy of the institution. Officials at the central bank, including Governor Eddie George, had no knowledge of or part in the preparations.

The model for the autonomy of the Bank of England was more similar to that of its counterpart in New Zealand than to that of the German Bundesbank. Through its new organic law, the English institution gained operational autonomy but would not set its own goals. The governance model was collegial, with an eight-member Monetary Policy Committee presided over by the Governor. In the English case, the law assigned responsibility not to the Governor alone, but to all the members of the Monetary Policy Committee. In addition to the reports the bank was to submit to Parliament, specifically to the House of Commons Treasury Committee, the minutes of the Monetary Policy Committee were to be published, along with the individual opinions of its members.

In summary, the trend toward vindication of the autonomous central bank began in New Zealand, North America, Western Europe, and to some extent in South America, through the singular case of the Central Bank of Chile. These were its origins, but the movement spread all over the world, even into Asia. Given the cultural and legal idiosyncrasies of that region of the world, the trend toward central bank autonomy took on a special profile and gave rise to some peculiar cases. One of these was Japan, not only the most advanced economy of the region but also one of the world’s most developed nations. Another noteworthy case was Indonesia, where the process of reforming the central banking system took place toward the end of the 1990s. And finally, though the special nature of its experience puts it in a category apart, China also deserves at least a mention.

Unfolding within the framework of the organic law of 1942, the relations between the Central Bank of Japan and Japanese Ministry of Finance were on ambiguous terrain. The central bank’s good results in the combat against inflation gave it certain credibility and sometimes the policy views of bank officials even prevailed over those of the Finance Ministry. Indeed, the Finance Ministry had lost a great deal of prestige when, responsible for supervising the banks, it had to confront a public outcry in the 1990s over a banking crisis of gigantic proportions. The banking crisis arose during a deep recession, marked almost by deflation, which created a propitious atmosphere for reform. From a political viewpoint, the issue of central bank autonomy brought the additional benefit of limiting the enormous power of the Finance Ministry. The movement in favor of autonomy sought inspiration in the European experience, and a new law for the Bank of Japan was passed in 1998. Under the new legislation, the Policy Board, originally created in 1949, was empowered to establish monetary policy without the intervention of any other authority. The members of this Board were to be appointed by the cabinet. Since 2000 the Board has been chaired by the Governor of the bank. The law identified price stability and the proper functioning of the system of payments as the goals to be met. According to the new legislation, the central bank must consult with the government on all matters within its jurisdiction but the government has no voting rights on the Board through which its views can be imposed. The standards for transparency and proper rendering of accounts were formulated in 2000. In abidance by these standards, the Bank of Japan began to communicate directly with the public, mainly through press releases. Accounts are also rendered to the Congress and it was decided that the minutes of the meetings of the Policy Board would be published within a period of no more than four weeks after the session in question.[18]

The Bank of Indonesia had a long tradition of subordination to the Finance Ministry. This state of affairs was radically modified as a result of the 1999 reforms which gave the institution its independence. The impulse for these reforms was the grave financial crisis of 1997-1998, which hit Indonesia with great intensity. President Suharto accused the management of the central bank of incompetence and removed the governor from his post, although the bank had in fact been receiving the technical and moral support of the International Monetary Fund in the course of the crisis. From a political vantage point, an opportunity for reform came only with the fall of Suharto. The new president, Habibie, recognized that it was necessary to apply a more disciplined monetary policy and that the independence of the central bank would be required for this purpose. The corresponding law was passed in 1999 and further amended in 2004. The legislation assigned the Bank of Indonesia the task of maintaining the stability of the local currency (the rupee), granting it independence in terms of both setting goals and operating.[19]

The transition process in China that culminated in the autonomy of its central bank began in 1983. Through the reform of that year the People’s Bank of China became specialized as a central bank, abandoning its activities as a commercial bank. In 1984 it was separated from the Ministry of Finance and around a decade later an equally important step was taken. The organic law of 1995 stipulated that the monetary policy and supervision of the banking system were to be responsibility exclusively of the central bank. Other key provisions were contained in Articles 7 and 37 of the legislation. According to the former article, monetary policy and correlative functions were to be implemented by the People’s Bank of China independently, in accord with the law, and its operations were to be free of intervention by local governments, governmental agencies, local organizations, and individuals. The latter article stipulated that the bank was to manage its own budget independently.[20]

The worldwide wave of reforms in favor of central bank autonomy had a diversity of causes. One important factor was doubtless the example of older independent central banks that had consolidated their prestige and credibility, such as the Federal Reserve in the United States and the Bundesbank in Germany. Another important influence was that of newly created autonomous central banks, which powerfully attracted the attention of international public opinion. The formation of the European Monetary Union was another event which encouraged the trend. The corresponding treaty called for greater autonomy of central banks in individual European countries before the following step of establishing a European Central Bank. This was particularly the case of Italy and France, whose central banks were granted autonomy in 1992 and 1993, respectively. In 1998 the European Central Bank was created, probably the most autonomous institution of its kind in the world. It awakened interest in analyzing its formative elements and offered the challenge of taking the measure of its independence.

A pioneering attempt to evaluate the level of autonomy was made by two scholars, Bade and Parkin, in 1982. Alberto Alesina and Lawrence H. Summers joined in the task in 1988, adding four countries to the sampling of Bade and Parkin. A further step was taken in 1991 by Grilli, Masciandaro, and Tabellini, who created an index for estimating not only the political independence of central banks but also their economic independence. According to these authors, political independence is the central bank’s ability to set its own goals and objectives independently. Economic independence is the ability to choose without interference the procedures and instruments of monetary policy. Obviously, political independence would include fundamental elements such as the existence of an explicit goal in the area of price stability, protection against dismissal for the governor and members of the managing board, and limits on, or the prohibition of, loans to the government.[21]

The Central Bank of Chile

The world of economic ideas and policies was changing rapidly. In this period of reforms and changed focuses, one aspect of the transformation of central banks had occupied an important place: the question of autonomy. The case of the Central Bank of Chile was particularly important in this process, as a pioneer among developing nations. In Chile the very interesting process of granting autonomy to the central bank went through the following stages: historical background, draft bill, debate, approval, implementation, and consolidation. In Latin America in particular, the Chilean experience was important to many other countries seeking similar reforms.

In essence, abstracted from incidental legal, political, and theoretical details, the granting of autonomy to the Central Bank of Chile was the result of half a century of uncontrolled inflation in the country. Doing away with the “scourge of inflation” required a careful structural reform. The common denominator of all the administrations that had governed Chile for a little more than half a century —from the end of the 1930s to the beginning of the 1990s— was high inflation. Over the period just mentioned, the average inflation rate was 43% annually. If we remove from the calculation the Allende years, when inflation shot up to 231% annually, the rate would still stand at the high level of 32% annually. Over the course of fifty years, prices rose by less than 10% annually on only six occasions: three times in the 1940s, twice in the 1960s, and once in the 1980s.[22]

The key moment for the autonomy of the Central Bank of Chile was Law no. 18840, which went into effect in December of 1989. This reform was in itself the result of a gradual process, however, in which the enactment of a new Constitution in 1980 had been an important step. Article 9 of the Constitution stated that the Central Bank of Chile was to be an “autonomous institution of a technical character with its own capital.” The constitutional text also declared (Art. 98) that the central bank was to operate exclusively with financial institutions and that “no public expenditure or loan [could] be financed with direct or indirect credits from the Central Bank, except in the event of war.” This put an end, at least de jure, to the time-honored Chilean practice that had been the main cause of inflation in the country. Henceforth, the public sector would have to seek its own access to the lending markets.[23] The new Constitution also outlined the organization and operational format of the central bank, adding that an organic law was to be passed in the near future.

Formal work on the issue was taken up again in 1986. At the beginning of that year, a commission was appointed to draft a law for an autonomous central bank. The favorable economic results obtained in the period had contributed to reinforcing the idea of a central bank “with a flexible formula for currency management, committed to monetary stability.” The commission finished its work in 1987. Numerous experts had been consulted, included people who had held important positions in the Central Bank of Chile. Another essential source of guidance was the experience of three well-known and highly prestigious autonomous central banks in the world: those of West Germany, the United States, and Switzerland. Surprisingly, little was known in Chile about contemporary efforts in New Zealand to provide the country with an independent central bank.

The Chilean proposal was for an autonomous central bank to be governed by a five-member board. Members of the board would be appointed for terms of ten years, their terms overlapping by periods of two years in each case. The fundamental point was that the board would not be subject to the instructions of any other authority and no member of the board could be removed from his or her post by decision of the Legislative or Executive branch. Thus, monetary policy in Chile would be managed by this board, which was required to render an accounting of its actions to society through the Congress. The role of the central bank was precisely defined, on the model of its West German counterpart, as “watching over the stability of the currency and the normal functioning of internal and external payments” (Law no. 18840, Article 30).

It was still the time of the military government. The draft law prepared by the commission was submitted to a long process of review and consultation by the Executive before being sent to the real legislative power, which then consisted of the so-called Board of Commanders in Chief. Then, in a completely unprecedented action, the military authorities decided to make the draft project public in its entirety. An intense debate was engaged, of a remarkably high intellectual level, on the issue of whether the country was to be given an autonomous central bank. Several months later, after not a little dialectical skirmishing, the legislative commission offered its definitive proposal. This was the culmination of a careful review process during which, for the good fortune of the country, several of the observations made in the course of the public debate were incorporated into the plan.

Central Bank of Chile building during its modern autonomous period.

The debate had been greatly complicated by both political and technical considerations. The preparation of the new Law of the Central Bank of Chile was taking place at almost the same time as the process to restore democracy. The military government had organized a referendum, to be held on 5 October 1988, in which two options were placed before the citizenry: the continuation of General Pinochet’s mandate for eight more years or the election of a new president and the complete renewal of the Legislative branch. Chileans voted to return to democracy and an election was scheduled for December of the following year.

The referendum did not interrupt work in progress on the new central bank law. A draft bill was submitted to Congress just a few weeks after the referendum, generating a great deal of suspicion among the opposition and giving rise to many protests and criticisms. The opposition saw the proposal as a possible trap to gain control over future management of the economy. It was argued that eight long years had passed since the enactment of the Constitution and nothing had been done about an organic law for the autonomous central bank. It seemed a suspicious coincidence that the process was just now taking place, exactly coinciding with the transition to democracy.[24]

The specific charge was that the preparation of the law was a maneuver by the military regime to make it difficult for whatever government that emerged from the upcoming election to manage the economy through its own economic policy. A particular concern was the initial makeup of the board, as stipulated in the first transitory article of the law. According to the draft law, the members of the board were to be appointed by the military government, which is to say Pinochet, just a few days before the presidential and congressional elections. Given the length of the terms, the fact that the board members could not be dismissed, and the way new members were appointed, the new president would not see a majority of his own appointees on the board until six years after beginning his mandate.

The debate revolved around three fundamental issues. The first was the risk of central bank autonomy disturbing the coordination between different economic policies and the administrative cooperation of the government and the monetary authorities. Yet it was well known to experts in the field, both in Chile and abroad, that central bank autonomy did not signify isolation or opposition to other powers. Another question that raised doubts was whether autonomy granted excessive powers to the central bank. If this imbalance were not righted, an autonomous institution might come to constitute an unelected alternative to the other branches of government. Closely related to this issue was that of the central bank’s public responsibility within the framework of the new law. It was necessary, in other words, to establish trustworthy and effective procedures whereby the bank could render an accounting of its performance.[25]

The critics of the project were respected analysts whose views gained wide circulation. It is not surprising, therefore, that their ideas were taken into account and incorporated into the law. The most important modification was the stipulation that “the Board, in adopting its agreements, must bear in mind the general orientation of the government’s economic policy.” Another change was the expansion of the role of the Finance Minister in the bank’s operations. The Finance Minister could attend the meetings of the board, with voting rights, and request the suspension of its resolutions for up to fifteen days to allow for further discussion thereof, though such requests could be overruled by the unanimous consent of the board. The Finance Minister could also veto the application of exchange restrictions, except in the case, again, of unanimous rulings by the board. Another modification was that the central bank would be required to inform not only the President but also the Senate of its decisions and actions. Finally, as a result of public debate and criticism, the idea of an Executive Committee, which was given ample authority in the original draft law, was eliminated from the definitive version.[26]

As was to be expected, the makeup of the first board was a highly controversial matter. The political atmosphere was tense and the motivations of the two groups in conflict did not coincide. For the military government, having a diverse board would mean admitting representatives of groups that had been systematic and often implacable opponents of its economic policies. In fact, some of these opposition figures were not even sympathetic to the idea of central bank autonomy. For this opposition, which had won a political victory over the military government, autonomy implied accepting, albeit for a limited time, a law in the drafting of which they had not participated and whose implications were not necessarily favorable to them. It was feared that an inflexible and intransigent board would lead to a lack of coordination between the policies of the central bank and those of the new government. At the same time, no one wished to see the worst-case scenario develop: that this opposition, eventually coming to power through the electoral process, would have to amend or repeal a law that had turned out to be limiting and dysfunctional.

At this difficult conjuncture, both sides understood that the best outcome must be through negotiation. And so it happened. Leading the negotiations for the outgoing government was the Interior Minister, Carlos Cáceres, and for the opposition, the economist Alejandro Foxley, the head of the economic team of the Concertación movement and the most likely candidate to head the Ministry of Finance in the future democratic government. Foxley understood the advantages of a negotiated settlement. It was decided, therefore, that the outgoing government and Concertación would each appoint two members of the board. The chairman would be a neutral consensus choice. On the basis of this agreement, the military government appointed Enrique Seguel, an army general who had headed the central bank from 1985 to 1988 and been appointed Finance Minister in 1989, and Alfonso Serrano, who had succeeded Seguel at the head of the central bank. Concertación appointed Roberto Zahler, a monetary expert from eclac of Christian-Democrat leanings, and Juan Eduardo Herrera, an economist belonging to the Party for Democracy and a senior executive in a mining company. Appointed as chairman of the board was economist Andrés Bianchi, who was serving as Assistant Executive Secretary of eclac at the time.[27]

Chilean economist and central banker Andrés Bianchi played an important role in efforts to grant autonomy to the Central Bank of Chile.

It was to the benefit of all, therefore, that a confrontation was avoided and the issue resolved through a compromise. The definitive solution had been reached in stages. The original proposal by the military government was largely unilateral: four board members linked to the regime and a single independent one. This was rejected by the opposition and a second round of negotiations was necessary, leading finally to the balanced formula accepted by both sides.

The negotiated settlement of the makeup of the board of the Central Bank of Chile had produced the immense benefit of preventing the plan for autonomy from being torpedoed by political conflict. As it happened, the formula of a certain quota of members appointed by either side was far from perfect, and this did not go unnoticed by critics of the project. Nevertheless, no observer went so far as to suggest that anyone with insufficient merit or ability had managed to get onto the board, though the organic law stipulated no special qualifications for membership in any case. Four years after the central bank gained its autonomy, Daniel Tapia, a prestigious Chilean scholar, made a very critical evaluation of the party-quota formula used to choose the members of the board of the Central Bank of Chile. When the first appointment of a new board member came up in 1991, Tapia wrote that the method had been “debatable for an institution which should be characterized by its technical nature and by its distance from the centers of political decision-making, especially contemporary ones.”

Tapia’s criticisms surely contained a grain of truth, but his catastrophic predictions never materialized. Yet it required a great deal of work for them to be avoided and indeed the efforts of the central banks and its board turned out to be very successful. Andrés Bianchi has written that when the institution began to operate autonomously it faced two very serious challenges. The first, of a technical economic nature, was to continue to stabilize the Chilean economy so that society would recognize that the autonomy of the central bank was something useful. The second challenge, which was of a political and institutional nature, involved three objectives: legitimizing the autonomy of the bank with regard to public opinion, consolidating it, and achieving effective coordination between the central bank and the other economic authorities in the government and, consequently, between monetary policy and the government’s other economic policies.

The acceptance of autonomy by Chilean society presented itself as a difficult challenge. The day on which the board of the central bank was appointed, opposition politician Patricio Aylwin declared that the achievement demonstrated “once more that consensus was and is possible,” though he went on to add that “as we have pointed out repeatedly, we have reservations about the Central Bank law and believe certain modifications of it are indispensable.” These “modifications” would of course be designed to weaken or undermine its autonomy. Aylwin concluded by saying that “the agreement reached regarding the Directorship” did not imply an abandonment of the aforementioned intentions.[28]

The survival of the agreement would have been impossible if the multiparty makeup of the board had not proved to be functional. Nothing ensured beforehand that it would be so, given the background of division and confrontation among Chilean economists during the military period. As chairman of the board, Bianchi was involved in a delicate process of compromise and collaboration, not only among the members of the board but also with the technical personnel of the central bank. His pragmatic goal: to make the institution function more effectively. A spirit of cordiality and collaboration among the members of the board also made it possible to establish a constructive relationship with the Finance Ministry. What was required on this front was balance: on the one hand, that the Ministry might observe a spirit of comprehension and collaboration in the central bank, and on the other, that this attitude and the actions determined by it would in no way be to the detriment of the new autonomy established by the law.

A session of the board of directors of the Central Bank of Chile during its autonomous period.

Another novel task stipulated by the central bank’s organic law was the rendering of accounts. According to the law, every April 30th the institution was to submit to the consideration of the Senate a full report on the policies implemented over the previous year, the results achieved, and the work program for the year to come, with a detailed account of the objectives to be pursued. At the same time, the central bank attempted to improve its communication with different sectors of society, beginning with the economists and traders in the capital markets. Something that greatly contributed to the gradual acceptance of autonomy by the general public was the realization that, contrary to predictions that had been made, “a parallel economic team was not installed in the Central Bank, applying policies in contradiction to those of the Government.” Communication links were also established with the Congress and in particular with the Finance Commission in the Senate, in order to make the viewpoint of the central bank known.

In technical economic terms, the central bank’s immediate priority was to combat inflation. Its long-term goal was of course definitive stability. Nevertheless, after decades of inflation in the Chilean economy, any focus on stability would have to take into account the gradual nature of the process. But at the same time, if there was no progress with stabilization, it would be difficult to win public acceptance of central bank autonomy. Within this context, the board had to adopt harsh regulatory measures in January of 1990 to contain the growth of domestic spending, which in the two previous years had increased by 9% and 12%. The regulation consisted of raising the rates for central bank credit operations by almost 200 base points.[29]

In the years following autonomy, the board of the central bank had to implement three regulatory measures to check incipient inflationary pressures. The first, described in the previous paragraph, was carried out at the beginning of 1990, accompanied by an event worth recalling. In the face of concern over a growing trade deficit, the government proposed a devaluation to the central bank, as a corrective measure. The board of the bank received the proposal and carefully studied it, but then “in an early show of autonomy (albeit by a divided vote) rejected the option, fearing that it would stimulate inflationary pressures.” Instead, the board decided to apply the aforementioned regulatory measure. “Thus, the Central Bank of Chile sent to both the private sector and the public sector a powerful message of commitment to stability and discipline in expectations.”[30]

The board implemented two other regulatory actions in the 1993-1994 and late 1995-1996 periods. On both occasions it accepted criticism from the government and, without yielding, moderated the force of its restrictions in order to be consistent with the gradual approach it had correctly decided to adopt. It was only in 1991 that the Central Bank of Chile adopted the system of announcing annual inflation rate objectives, having previously set goals with margins of three years. As Table 1 shows, the gradual approach was quite successful in reducing inflation, which dropped continuously from a level of 27.3% in 1990 to 4.7% in 1998.

Table 1
Central Bank of Chile
Inflation: Attainment of Objectives
(% variation Dec.-Dec.)

Target inflation

Actual inflation

1989

-

21.4

1990

-

27.3

1991

15-20

18.7

1992

13-16

12.7

1993

10-12

12.2

1994

9-11

8.9

1995

9.0

8.2

1996

6.5

6.6

1997

5.5

6.0

1998

4.5

4.7

Source: Juan Andrés Fontaine, Banco Central Autónomo: en pos de la estabilidad (Santiago: Centro de Estudios Públicos, 2012), p. 401.

In October 2009, the chairman of the Central Bank of Chile, José de Gregorio, delivered a speech commemorating the important reform achieved two decades before. It was entitled “Twenty Years after the Autonomy of the Central Bank of Chile.” There were two principle arguments in this important address. The first was that inflation is extremely harmful to the functioning of an economy and that an independent central bank is much better prepared to achieve price stability than a central bank without autonomy. Thus, the autonomy of the central bank could be interpreted as the institutionalization of a credible commitment to price stability. A second theme of José de Gregorio’s speech was the relation between autonomy and transparency. Transparency is necessary to validate “the legitimacy that an autonomous institution, whose decisions have important implications for the national welfare, must have in a democratic system.” A crucial passage in the address dealt with the results that had been obtained. Over two decades of autonomy, the average annual inflation rate had been 7.5%, but was down to 3.2% in the second half of the period. Moreover, the volatility of prices had fallen sharply in comparison to previous decades. Thus, “twenty years after the autonomy of the Central Bank of Chile, we can say that it has been successful and has been consolidated.”[31]

Endnotes

Echoes from abroad

[1] Charles R. Bean, “Crecimiento económico y desarrollo del Reino Unido: de la postguerra al caso de la Señora Thatcher,” Desarrollo y Sociedad 15-16 (September 1984 and March 1985).

[2] Christopher Johnson, The Economy under Mrs. Thatcher, 1979-1990 (London: Penguin Books, 1991), pp. 144 and 145.

[3] Ibid., Table 33, p. 300.

[4] Burton Yale Pines, “The Lessons of Reaganomics,” Speech at the Chinese Association for International Understanding (Beijing, 20 March 1983).

[5] Arthur B. Laffer, “The Ellipse: An Explication of the Laffer Curve in a Two-factor Model,” in The Financial Analyst’s Guide to Fiscal Policy (New York: Greenwood Press, 1986), pp. 1-35.

[6] Ignacio Gil Pechuán, “Orígenes de la integración en Europa,” available online at http://personales.upv.es/igil/Euro.pdf.

[7] José M. Barrionuevo, “A Maastricht Country South of the Rio Grande,” Barclays Capital Research (21 April 2003), p. 3.

[8] John Williamson, “No hay consenso. Reseña sobre el Consenso de Washington y sugerencias sobre los pasos a dar,” Finanzas y Desarrollo (September 2003), p. 10.

[9] De Kock, Central Banking, p. 20.

[10] John Singleton, Central Banking in the Twentieth Century (Cambridge: Cambridge University Press, 2011), p. 115.

[11] Alan S. Blinder, The Quiet Revolution: Central Banking Goes Modern (New York: Yale University Press, 2004), pp. 1-4.

[12] Philip Keefer and David Stasavage, “When Does Delegation Improve Credibility? Central Bank Independence and the Separation of Powers,” Centre for the Study of African Economies, Oxford, Working paper, wps/98/18.

[13] Daron Acemoglu, Simon Johnson, Pablo Querubin, and James A. Robinson, “When Does Policy Reform Work? The Case of Central Bank Independence,” National Bureau of Economic Research, working paper 14033, Appendix Table A1.

[14] Quoted in John Singleton, “The Central Bank and Government Partnership in Australia and New Zealand since the 1930s,” in Gordon Boyce, Stuart Mcintyre, and Simon Ville (eds.), How Organizations Connect: Investing in Communication (Melbourne: Melbourne University Press, 2006), p. 15.

[15] Quoted in John Singleton et al., Innovation and Independence: The Reserve Bank of New Zealand, 1973-2002 (Auckland: Auckland University Press, 2006), p. 308.

[16] Singleton, Central Banking in the Twentieth Century, p. 211.

[17] Pierre L. Siklos, The Changing Face of Central Banking (Cambridge: Cambridge University Press, 2002), p. 68.

[18] Hiroshi Fujiki, The Monetary Policy Committee and the Incentive Problem: A Selective Survey (Tokyo: Institute for Monetary and Economic Studies, Bank of Japan, 2005), p. 39.

[19] Simone Polillo and Mauro Guillen, “Globalization pressures and the State. The Worldwide Spread of Central Bank Independence,” American Journal of Sociology 110 (2005), p. 1775.

[20] Marco Arnone, Bernard S. Laurens, Jean-François Segalotto, and Martin Sommer, “Central Bank Autonomy: Lessons from Global Trends,” International Monetary Fund, IMF Staff Papers, vol. 56, no. 2 (2009), p. 282, and Bernard J. Laurens and Rodolfo Maino, “China: Strengthening Monetary Policy Implementation,” IMF Working Papers, wp/07/14, p. 18.

[21] Alberto Alesina and Lawrence H. Summers, “Central Bank Independence and Macroeconomic Performance: Some Empirical Evidence,” Journal of Money, Credit and Banking, vol. 25, no. 2 (May 1993), p. 153.

[22] Andrés Bianchi L., “La autonomía del Banco Central de Chile. Origen y legitimación,” Economía Chilena, vol. 12, no. 3 (December 2009), pp. 11 and 12.

[23] Juan Andrés Fontaine, “Banco central autónomo: en pos de la estabilidad,” in Felipe Larráin and Rodrigo Vergara (eds.) La transformación económica de Chile (Santiago: Centro de Estudios Públicos, 2012), p. 395.

[24] Bianchi, “La autonomía del Banco Central de Chile,” pp. 62-64.

[25] Fontaine, “Banco central autónomo,” p. 401.

[26] Bianchi, “La autonomía del Banco Central de Chile,” pp. 14 and 15.

[27] Ibid., pp. 64-68.

[28] “Aylwin y Lagos satisfechos por Consejo del Banco Central,” La Nación, 6 December 1989.

[29] Bianchi, “La autonomía del Banco Central de Chile,” p. 19.

[30] Fontaine, “Banco central autónomo,” pp. 404 and 405.

[31] José de Gregorio, “A veinte años de la autonomía del Banco Central de Chile,” Economía Chilena, vol. 12, no. 3 (December 2009), p. 9.

Central Bank Autonomy in Mexico

A Historical Overview

The publication consists of 10 volumes:

1. The Central Banking System in the World
With Preface and Foreword

2. Mexican Central Bank Autonomy: Historical Background

3. Concurrent Visions

4. Echoes from Abroad

5. Institutional Autonomy

6. A Difficult Takeoff

7. Unprecedented Stability
With Sources Consulted

Table of Contents

- Echoes From Abroad

- A Liberalizing Current
- New and Restored Autonomies
- The Central Bank of Chile
- Endnotes