Political pressure on the Bundesbank: An empirical investigation using the Havrilesky approach

This paper applies the method as developed by Havrilesky to examine whether a central bank responds to political pressure to the Bundesbank, which is widely believed to be one of the most independent central banks in the world. We construct an index for external pressure by counting the number of articles in three newspapers in which politicians or pressure groups argue in favor of a more or less restrictive monetary policy. We conclude that the Bundesbank did not respond to political pressure. However, its policies were in line with the wishes of the banking sector. (C) 2002 Elsevier Science Inc. All rights reserved.