Zusammenfassung:
This paper investigates the impact of reforms altering legal central bank independence (CBI) on monetary policy discipline and credibility, two key mechanisms shaping price stability. Using a sample of 155 countries over more than 50 years (1972-2023), we show that reforms improving CBI strengthen monetary discipline and the credibility of central banks. Larger reforms enhance monetary discipline with a lag, achieving their full effect after ten years. Central bank reforms have a greater impact on monetary discipline in countries that have not reversed earlier reforms. CBI reforms have the strongest impact in democratic countries, countries with flexible exchange rates, and those without a monetary policy strategy. The effects of CBI on monetary discipline and credibility are amplified when public debt-to-GDP ratios are high. These findings underscore the crucial role of CBI as a key factor influencing price stability and highlight the risks associated with weakening institutional autonomy.