Replication Data for: The Economic Consequences of Banking Crises: The Role of Central Banks and Optimal Independence

A large literature establishes the benefits of central bank independence, yet very few have shown directly negative economic consequences. I argue that, rather than improving economic outcomes, independent central banks are myopically focused on inflation and this leads to tepid responsiveness to banking instability. I show that banking crises produce larger unemployment shocks, and credit and stock market contractions when the level of central bank independence is high. Further, I show that these significant economic costs can be mitigated by abandoning the inflation-centric policy mandates predominantly considered necessary. When the bank has high technical and political independence, banks’ whose policy mandate does not rigidly prioritize inflation produce significantly better outcomes during banking crises. At the same time, I show that this configuration does not produce higher inflation, suggesting it achieves a more flexible design without incurring significant costs.