The Degree of Legal Independence of the Mediterranean Central Banks: International Comparison and Macroeconomic Implications

Abstract

The aim of the present paper is to assess the degree of central bank legal independence enjoyed by the central banks of the south shore of the Mediterranean Sea, which belong to the Euro-Mediterranean Partnership and to shed some light on the macroeconomic outcomes of different degrees of independence. To this end a methodology used by the International Monetary Fund, here slightly modified to better suit the characteristics of the central banks in the area, is introduced and applied.

The main findings of the present work are as follows: i) as regards legal independence, the Mediterranean countries show a diverse picture, sometimes far from the common wisdom; ii) legal independence does not always appear in line with the de facto situation; iii) Cyprus and Malta (that recently joined the European Union), as well as Turkey, that has been recognized a candidate country status, do not always show the best degrees of legal/actual independence and iv) many central banks of the area have recently amended their Statutes with a view to achieving more independence, as the issue has a key role in the modernization of the economies and a priority status in the implementation of a comprehensive and effective set of political and economic reforms.