Measuring Central Bank Independence in Selected Transition Countries and the Disinflation Process

The paper measures the degree of legal and actual central bank independence (CBI) in five Central and Eastern European transition economies striving for EU accession, namely the Czech Republic, Hungary, Poland, Slovakia and Slovenia (CEEC-5). The degree of legal CBI is measured by applying the two most widely used indices, the Cukierman and the Grilli-Masciandaro-Tabellini (GMT) indices. Moreover, the turnover rate of central bank governors is used as a proxy to measure actual CBI. The paper gives an interpretation of computed results, comparing the findings with those of other authors and earlier calculations. Furthermore, the indices on legal and actual CBI themselves are critically reviewed, in particular against the background of the Maastricht Treaty requirements, which in practice constitute the driving force for any amendment of central bank laws in the CEEC-5. Moreover, the role of CBI in bringing down inflation in the CEEC-5 at different stages of transition is briefly discussed. The paper concludes that the overall degree of legal CBI is comparatively high in all countries examined, while the measured turnover rates of governors do not seem to fully reflect the degree of actual CBI in the CEEC-5. Looking at the role of CBI in the disinflation process at different stages of transition, the main causes for inflation seem to have been beyond the direct control of the central bank. A high degree of CBI, together with a reasonable mix of fiscal and monetary policies as well as structural reforms, will be necessary for the CEEC-5 to meet all requirements for joining the EU and, in a more distant future, for adopting the euro.transition; central bank independence; disinflation

Central Bank Independence in Southeastern Europe with a view to EU integration

The paper provides an analysis of central bank legislation in eight Southeastern European (SEE) countries. For this purpose, the paper uses the ECB classification and examines functional, institutional, personal and financial independence. Moreover, the paper sheds some light on the practical implementation of CBI in these countries. The study finds that the degree of CBI corresponds largely to the respective country's level of integration with the European Union. The paper concludes that legal arrangements to protect the status of the central bank are a necessary, though not sufficient, prerequisite for CBI. In fact, the importance of practical implementation cannot be overestimated.central banks; central bank independence; transition economies; EU integration; European Union; Bulgaria; Romania; Croatia; former Yugoslav Republic of Macedonia; Albania; Bosnia and Herzegovina; Montenegro; Serbia.

Central Bank Independence in Southeastern Europe with a View to Future EU Accession

The paper provides a qualitative overview on current central bank legislation in Southeastern Europe (SEE), namely Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Romania, and Serbia and Montenegro, and assesses the degree of central bank independence (CBI) already achieved, using the Maastricht Treaty requirements as a yardstick. The following aspects of legal CBI are examined: first, the definition of statutory objectives in central bank laws (functional independence); second, the central banks independence in the formulation and implementation of monetary policy (institutional independence); third, the legal status of the central bank governor and other members of the highest decision-making body (personal independence). Fourth, the paper examines two aspects of financial independence, namely the budgetary independence of the central bank itself and the prohibition of monetary financing. Fifth, the paper briefly deals with central bank accountability issues. Moreover, selected aspects of actual CBI are analyzed. The paper concludes that the central bank laws already comply with Treaty requirements in some areas, while a considerable number of weaknesses remain. With a view to future EU accession, a further strengthening of both legal and actual CBI will be necessary for the countries to fulfill the requirements of the Maastricht Treaty.

10 Years of EU Membership: The OeNB in a Changing Environment

This study discusses the integration developments which have had an institutional, legal and functional effect on the Oesterreichische Nationalbank (OeNB) since Austria joined the European Union. The first stage of Austria's EU membership (1995 to 1998) brought about three major challenges for the OeNB: integration into European bodies and forums, achievement of economic and legal convergence and preparation for monetary union. Once Stage Three of Economic and Monetary Union (EMU) began on January 1, 1999, the OeNB became a member of the European System of Central Banks (ESCB) and the Eurosystem, which went hand in hand with fundamental changes in the structure of the OeNB's tasks in almost all business areas. The introduction of euro banknotes and coins on January 1, 2002, an undertaking requiring an effective communication policy coupled with sophisticated cash logistics, posed a formidable challenge. The OeNB has succeeded in maintaining its role as a think tank and decision-making body for economic policy in Austria, and in making a contribution to stability and peace in the enlarged EU within the framework of European institutions and the Eurosystem.Central Bank, EU Membership, Austria, Institutions

Euroization in Central, Eastern and Southeastern Europe – First Results from the New OeNB Euro Survey

This article presents the main results of a new OeNB survey on foreign currency holdings, which was conducted for the first time in late 2007 in four Central and Eastern European (CEE) as well as seven Southeastern European (SEE) countries. The most important questions asked in the survey pertain to the currency composition and the amounts of foreign currency cash holdings and foreign currency deposits as well as to the motives for holding foreign currency cash and deposits. The authors conclude that the euro plays a dominant role in foreign currency-denominated assets (both cash and deposits) throughout the region.

The 2008 Fall Wave of the OeNB Euro Survey – A First Glimpse of Households’ Reactions to the Global Financial Crisis

This article presents selected results of the third wave of the OeNB Euro Survey, which was conducted in Central, Eastern and Southeastern Europe (CESEE) in October/November 2008, i.e. at a time when the global financial crisis had arrived in Europe. Therefore, this article focuses on first evidence of households’ reactions to the crisis by comparing the most recent results with those of the preceding survey wave of May/June 2008. Although people’s general assessment of the economic situation and their trust in banks have both deteriorated substantially, according to our results, this has not (yet) changed people’s behavioral patterns in terms of their foreign currency holdings. In particular, the dissemination of euro cash holdings and euro-denominated savings deposits remained stable relative to earlier waves of the OeNB uro Survey.Euroization, global financial crisis, economic sentiment, survey data, CEE, SEE

CESEE Households amid the Financial Crisis: Euro Survey Shows Darkened Economic Sentiment and Changes in Savings Behavior

This paper utilizes information from the OeNB Euro Survey, which was launched in 2007 and is conducted twice a year in ten CESEE countries. The most recent survey wave of May to June 2009 focused on the impact of the financial crisis on CESEE households. Results show, first, that the financial crisis is in fact severely felt throughout the region: Respondents’ assessment of the current economic situation has deteriorated, trust in the future stability of local currencies has diminished, and trust in banks has declined in almost all countries surveyed. Second, the analysis of aggregate monetary statistics reveals that households reacted by adjusting their portfolios immediately, but developments differ substantially across countries. Third, in countries with more persistent withdrawals, euro cash in circulation, surprisingly, has declined because households resorted to dissaving to compensate for decreasing income. The authors conclude that although a massive shock has hit the region, no dramatic changes in the overall degree of euroization have occurred. This subdued impact is likely to signal that past stabilization efforts have paid off and that the economic and monetary policy measures taken in the course of t the crisis were successful.Euroization, global financial crisis, portfolio decision, trust, survey data, Central, Eastern and Southeastern Europe

The OeNB Euro Survey in Central, Eastern and Southeastern Europe - The 2008 Spring Wave Update

This paper presents the main results of the second wave of the OeNB Euro Survey conducted in Central, Eastern and Southeastern Europe (CESEE) in May/June 2008. The results on foreign currency-denominated assets, both cash and deposits, broadly confirm the picture obtained from the first wave of the survey, namely that the euro plays a dominant role throughout the CESEE region. New evidence on foreign currency loans (FCLs) reveals that the share of FCLs in total household loans is substantial, both in Central and Eastern Europe (CEE) and Southeastern Europe (SEE). The article for the first time presents survey results on people’s general economic sentiment, comprising their assessment of the present and future economic situation, perceived and expected inflation and expected exchange rate developments. Finally, the paper provides an update on the expected date of euro adoption in the EU Member States surveyed.

East-West Conference

[East-West Conference of the Oesterreichische Nationalbank (OeNB) took place from the 3rd to the 5th of November 2002 in Vienna and covered the topic Structural Challenges and the Search for an Adequate Policy Mix in the EU and in Central and Eastern Europe.