THE ANTIINFLATIONARY INFLUENCE OF CORPORATIST STRUCTURES AND CENTRAL-BANK INDEPENDENCE - THE IMPORTANCE OF THE HUMP-SHAPED HYPOTHESIS

Many studies have found strong negative correlations between central bank independence and inflation, but the casual significance of this relationship is often challenged. We find that the negative relationship remains even when a number of other explanatory variables are considered. Special attention is given to the role of corporatism. Following Calmfors and Driffell it is argued that both high and low levels of centralization should be associated with lower inflation. We present empirical support for his hump shaped hypothesis, and find that the inclusion of corporatism does not diminish the significance of central bank independence.