Inflation and Central Bank independence revisited

King and Ma [Economics Letters 72 (2001) 95] claim that evidence which they report for a sample of 42 countries shows that central bank independence (CBI) and inflation are not significantly related. The present paper argues that this putative failure of CBI to affect inflation is due to King and Ma's use of an econometric methodology that does not account for the inaccuracy of their proxy for CBI. Employing an alternative econometric methodology that tackles the measurement error problem directly, this paper finds a strong negative relationship between CBI and inflation. (C) 2002 Elsevier Science B.V. All rights reserved.