On the Assessment and Implementation of 'Institutional' Remedies.

The most common approach to testing for the benefits of central-bank independence is argued to be methodologically flawed for the reason that the measure of independence does not permit a test of the hypothesis which suggests that these benefits exist. Particular doubt is cast on the merits of proposals to legislate to create independence. The argument is elucidated by comparison with the testing of a hypothesis about the benefits of centralized and decentralized unions. Copyright 1996 by Royal Economic Society.