Promote And Implement Health And Safety Essay

1.1 Legislation that relates to health and safety in a health/social care setting include the following. Control of Substances Hazardous to Health Regulations 2002, Management of Health and Safety at Work Regulations 1999, Personal Protective Equipment at Work Regulations 1992, Manual Handling Operations Regulations 1992 1.2 The main points of some health and safety policies or procedures such as control of substances hazardous to health COSHH are to make sure that any chemicals that are or could be dangerous to people’s health are used and stored in a correct way that minimises any potential risk to people. Manual handling operations regulations are to ensure that employees/employers are aware of the possible injury’s that can be caused by unsafety lifting procedures and has guidelines for manual handling procedures that greatly reduce the potential of a work related injury occurring due a manual handling operation. 1.3 Self: Any risks that you are aware of are checked and made save. You should also work to maintain a safe working environment. The employer or Manager: They are to make sure that those under their supervision are aware of hazards and possible risks. In addition they should make sure that these staff know how to deal with deal with the risks and hazards, and make sure they know how to ask for guidance for senior staff. These are in addition to the same responsibilities as myself. Others in the work setting: Colleagues have the same duty of care that I do. However ultimate responsibility lays with the Manager/Supervisor. 1.4 Tasks that require special training would include the restraining of a service user. Before undertaking this task a Positive Handling Techniques PHT training should be done. It is used to protect service users and others around them from harm. The administration of controlled medication or any other sort of medication is record on a medication administration sheet MARS, training is needed to follow this procedure to protect service users from medication administration errors. Before starting work in a social care  environment safe guarding training should be under taken, this is done for the protection of service users. 2.1One of the procedures used related to health and safety is a risk assessment. Risk assessments are to be followed for trips out reduce the risk of potential accidents and avoid hazards. They are done during the planning stage of an outhouse activity. The Positive handling techniques used, is an example of an agreed way of working to keep service users and emp loyees safe from physical harm. 2.2I have supported other to understand and follow safe practise when a new employee has started work. I have gone through the correct way to store and use cleaning products. I did this by talking the new employee though the practices used in the house while showing them where the products are stored and then demonstrating how to correctly clean. I have also help other members of staff when performing a practice fire drill by demonstrating the correct procedure to follow when the fire alarm is activated. 2.3I have reported potential health and safety risk by filling out a debriefing form. These are done after an unusual event has happened to make others aware of unusual event and help make action plans in the future to reduce risk if these events happen again. These debriefing forms have been bought up in individual meeting with my senior managers and we talk about the event. In the meeting it will be discussed if and action needs to be take. In cases where it was been agreed that procedures in place aren’t sufficient to deal with the event procedures have been changed then monitored to make sure that they are suitable to deal with the event if it was to happen again. 2.4I have used risk assessments to help plan a day trip for a service user. I made a schedule of the activities the service user wish to take part in, then looked at how they would be able to travel to the destination and what activities would be undertaken and the environment in which they were taking place. I t hen put this information on to a sheet and assessed each action and the potential risks and hazards involved and what could be done to reduce or avoid them. 2.5One way I have reduced the potential of risks and hazards at work was to wait for a service user to leave the house before using a steam cleaner in his room. I have also put up wet floor signs when mopping and will wait for the house to be as quiet as possible before starting to reduce slipping hazards. 2.6I have accessed additional support relating to health and safety before for the key policies files which are  stored in the office. 3.1Accidents could include common one such as slips, trips and falls. Others accidents could be cuts or burns common to kitchen environments. Head or back injuries are other examples of accidents that can happen in a health and social care work place, these can often occur when helping service users in times of distress. Sudden illness may happen at work may include strokes, heart attacks or asthma attacks. 3.2In the event of an accident or sudden illness the first person on the scene should make the area safe if it possible. A first aider should be found and once the situation has be assessed the relevant emergency services should be contacted if needed. Once the situation has been stabilised an accident form should also be completed by the person who has had the accident or be filled out on the behalf if they can’t do so themselves. 4.1When working with a service user it is important to promote good personal hygiene, such as washing hands before preparing food or after using the toilet. It is also important to fill in the infection control file to keep a check on what has been clean or needs to be cleaned. Also only use paper towels once when wiping down surfaces and separate ones for each door handle. Avoid coming in to work when ill to reduce the spread of the illness. Also make sure that anyone who prepare or works with food has had food hygiene training. 4.2I start by wetting my hands, if my hands are particularly soiled I will apply an appropriate specialist hand cleanser directly to the skin before wetting. I then will apply soap to my hands. Then clean my hands in the following stages. Rub hands palm to palm, rub palm over back of hand fingers interlaced on each hand, Palm to palm fingers interlaced, Fingers interlocked into palms, Rotational rubbing of thumb clasped into palm, Rotational rubbing of clasp ed fingers into palm. I then make sure my hands are thoroughly dried with clean paper towels. 4.3I ensure that I don’t pose a risk to others with my own health and hygiene by making sure that I am healthy enough to complete any task I undertaker safely. I also make sure that I wash my hands before preparing food and before and after helping a service user with self-care. I will also make sure I wear the correct clothing when performing these actions. I will covering my hand when coughing and use tissues when I sneezing or wash my hands if a tissue isn’t to hand. I will also stay out of work when ill to avoid spreading any infections. 5.12. Manual Handling Operations Regulations 1992 (MHOR) (as  amended 2002) The main points of The Manual handling Operations Regulations 1992 are as follows to reduce the risk of injury as far as is reasonably practicable, avoid hazardous manual handling operations so far as is reasonably practicable, assess any hazardous manual handling operations that cannot be avoided. The primary objective of PUWER 98 is to ensure that work e quipment should not result in health and safety risks, regardless of its age, condition or origin. Lifting Operations and Lifting Equipment Regulations 1998 (LOLER) requires that all equipment used for lifting is fit for purpose, appropriate for the task, suitably marked and, in many cases, subject to statutory periodic ‘thorough examination’. Records must be kept of all thorough examinations and any defects found must be reported to both the person responsible for the equipment and the relevant enforcing authority. 5.2There are four main principles to keep in mind when moving and handling. It is important to keep your spine in line, maintaining a natural posture. Adopt a comfortable wide stance to give a stable base. Keep the load close to your vertical centre of gravity. Finally use the large legs and buttock muscles to lift during any manual lifting activity. The acronym TILE is also helpful. This is Task, Individual, Load and Environment. 5.3I move and handle objects safely by following the principles and ensuring the load is not too heavy, that the route is clear, I hold it close to me with a straight back and bent legs. If a load is too heavy for me to move by myself I will seek help and work with another colleague to move the object. 6.1There are a number of substances that are hazardous to health that can be found in a health and social care environment. These can include cleaning products such as bleach or chorine that such be clearly labelled and stored away safely. Other hazardous substances could include human waste. Food that is past its best before date or stored incorrectly could be classed as hazardous. Other could be found as part of the building such as asbestos. 6.2When I store hazardous substances such as bleach and chlorine tablets I make sure I follow COSHH regulations and store the said chemicals in the designated area. I will wear rubber gloves when I handle any hazardous substances, an example would be when using chlorine tablets and placing them in to a mop bucket. An example of when I disposal of hazardous substances at work would be when I take out used wipes and pads. I will place these in a bag using gloves then seal the  bag and take them to a yellow bin and then dispose of the gloves in the bin aswell. 7.1Practices to prevent fires starting include switching off any electrical equipment that is not in use. Any cooking is monitored and not left unattended. To prevent the spread of fire there are fire doors which should remain closed when not being used and never wedged open. 7.2I prevent fire from starting by making sure that when not in use electrical items are tur n off. I will also make sure that there aren’t lots of in extensions socks on a mains plug socket. When cooking I will not leave the area unattended to monitor the food and prevent burning and a possible fire hazard. I will also make sure the hob is clean and the surrounding area is clear of obstructions. Also I will make sure the area not rags above sources of heat and remove and rags if so. Also avoid over filling dryers and clean out lint catcher regularly. 7.3When a fire is discovered the alarm should be raised then everyone should be evacuated from the building and make their way through the nearest fire exit to the designated fire assemble point. The emergency services should be alerted and the on call team notified. A register should be taken to make sure everyone who was in the building at the time is accounted for. 7.4I make sure when moving items around the property that they don’t obstruct evacuation routes. When I find routes are blocked I will remove the obstructions or ask someone else to do so and make sure the route is clear and save to use. I also check that the doors are functioning correctly and can be opened with easy. 8.1When I person I do not know wishes to enter the property I will ask for the names and the propose of their visit. I will then ask to see some form of identity, if I am satisfied I will grant them entry and ask the person to enter their details in to the visitors sign in book. Any person who wishes to access information will again ask them for their names and the reason they wish to have the information. After seeing some identification I will gain them access. If I were to have any doubts on either of the above I would seek help form a senior team member. 8.2To protect my own security and the security of others I would alert people if there are unknown people on the property grounds and ask said person to provide identification. I would also make sure that dangerous items such as knifes and scissors are all accounted for and stored away safely. 8.3When talking about staff or visitors to the premise it is important that they aware of the own whereabouts so that  hazardous can be pointed out and avoid. Also they can also be made aware of the nearest fire exits in case of emergency. For service users it is important that they are made aware of the environment they are in, such as a kitchen or by a road side so staff can help them manage the risks of being in the environment. 9.1Common signs of stress can include symptoms such as headaches, trouble sleeping such as irregular sleeping patterns, muscle pains and a reduced concentration span. 9.2Signs of stress in myself would include trouble sleeping, smoking and trouble being patient with people. 9.3Factors that trigger stress for me are missing deadlines, not taking enough time to relax and being uncertain about my job security. 9.4 There are many strategies for people to manage their stress. Eating and drinking can help, a healthy diet and avoiding drinking too much caffeine or alcohol can help people deal with stress. Another way to help reduce stress is to get 6 to 8 hours sleep each day. Exercise has also been link to reducing stress, breathing exercises can help people who are stress. Each of these has there pro’s and con’s. Some while getting enough sleep can help reduce stress, stress can cause people to have trouble getting to sleep. Eating healthy is a good way to feel good which can help. Exercise can work well but people may not be able to find time to do it. Breathing exercises can be helpful and could be done anywhere and don’t take much time to perform.

Internal Control and Shady Accounting Practices

Group 3 1. Why did accounting fraud occur at WorldCom? Fraud occurred at WorldCom for a variety of reasons. The senior executives had unchecked power because the board of directors were only figure heads, the ethics hot-line was nonfunctional, and in internal audit department did report to the appropriate link in the corporate chain to minimize fraud. These reasons, combined with a poor company culture, created the environment where fraud was able to become an acceptable business process. The senior executives at WorldCom had a â€Å"do it or else† attitude that was unchecked by any external force.That external force should have been the board of directors. Unfortunately the board of directors were being directed by the senior executives, given information about WorldCom that was disorganized to hide highly controversial and aggressive accounting techniques. These directors should have recognized they were being used and realized their agency to the stock holders to administer the oversight they were compensated to provide. The ethics hot-line, according to the case, while existed, was not known or trusted by the general population of employees at WorldCom.While many employees were aware of unethical activity, no of them felt that using this channel was a viable solution to addressing problems at WorldCom. Finally, the Internal audit department reported to the senior executive who ultimately steered their activity. If the executive was informed that internal audit was close to uncovering the unethical acts of managers, he directed their internal activity to other areas of the firm and blocked access to their department to the files that could expose the problem.If the internal audit department reported to the board of directors, better policing of executive activity would have been possible. All of these reasons had an element of poor culture in their makeup. Allowing senior executives to bullying their subordinates, inattentive directors, allowing for t he ethics channel to be nonfunctional, and accepting the unethical actions of seniors as the way things get done, ultimately doomed WorldCom to a spiral of actions that had the momentum of everyone's livelihood at stake, with no system in place to automatically apply the brakes to protect the shareholders. . What is the difference between earnings management (or earnings smoothing) and accounting fraud? What are the relevant criteria to use in distinguishing ethical from unethical accounting practices? I don't think there is a difference between earning smoothing and accounting fraud. Both practices intentionally mislead investors to alter their opinion of their holdings. Even if altering earning to smooth it out is mean only to put investors at ease, the underlying goal of smoothing is to change the perception of risk and volatility, which demand premiums in the market.Relevant criteria for distinguishing ethical from unethical accounting practices are if the accounting practice ma terially changes what the average investor values the company at and items addressed in GAAP and other accounting standards that are against conventional accounting guidelines actively used and unchallenged in the business landscape. 3. What internal processes or systems do you recommend to prevent fraudulent practices such as those present at WorldCom?Why were these practices not detected sooner? It appears WorldCom's fraudulent activities was uncovered by the companies own internal accounting department, indicating that at least one of five internal controls – â€Å"monitoring of controls† was functional. However, I believe if there were to have been periodic external auditing from impartial entities outside of WorldCom, the fraudulent activities would have been uncovered sooner than it occurred in 2005.Other internal control processes that could have prevented WorldCom's fraudulent activities and demise are; hiring competent, reliable and ethical personnel, particul arly in leadership positions that the company's board of trustees failed to accomplish, or perhaps were oblivious and complacent with the â€Å"red flag warnings† – falsely professed financial growth and profitability to increase the price of WorldCom's stock, and underreporting line costs (interconnection expenses with other telecommunication companies) by capitalizing these costs on the balance sheet rather than properly expensing them.In addition to inflating revenues with bogus accounting entries from corporate unallocated revenue accounts. I also believe there was failure with â€Å"assignment of duties†, or separation of duties if you will. Because, Mr. Ebber's seems to have been in control of his CFO – Sullivan, Controller – Myers, and Director of General Accounting – Yates. All of whom were unethical leaders at WorldCom that helped concoct â€Å"shady† accounting practices that led to the demise of WorldCom. It is my opinion t hat the above mentioned practices were not detected early enough due to micro management of lower taff employees by unethical leadership through autocratic style leadership, and environment that instilled fear in employees for fear of losing their jobs if any concerns were raised. An unfortunate reality that sadly exist in many big corporations, and even in governments. 4. What external processes or systems do you recommend to prevent and detect fraudulent practices such as those present at WorldCom? Were the directors on the board or the external auditors to be blamed?External auditing is an effective process that can in many ways prevent fraudulent activities within organizations, as the respective auditing teams have no â€Å"loyalty† to management or leadership within the company undergoing review by the external auditors. Retrospectively, I believe that the board of trustees of WorldCom at the time of the scandal would have wished that they had carefully looked into the background and leadership style of Mr. Ebber's and his co-conspirators to have checked for any signs of unethical behavior that many companies continue to blindly ignore.Barely about a year ago, Yahoo's former CEO was publicly humiliated, and subsequently fired by the company for â€Å"embellishing his academic credentials†. A very minor issue that could have been easily prevented, had the board of trustees of Yahoo looked thoroughly into Thompson's background by doing their due diligence. Unfortunately, the board of trustees of Yahoo failed at this task, much like what happened back in the late nineties with WorldCom and Ebber's. 5. You are a representative from the SEC.Briefly describe any sections of Sarbanes-Oxley Act of 2002 that you would cite to either Mr. Sullivan or Mr. Ebber's when they refuse to comply with your request for information. Under the federal regulations and securities Section 3(a)(47) of the Securities Exchange Act of 1934 (15 U. S. C. 78c(a)(47)), ref usal of any individual(s), or company(s) to conform to set accounting practices including external auditing by appropriate personnel (entities) will be liable to punitive actions set forth by federal legislations – up to or more than 25-years imprisonment and fines.Additionally, accounting and auditing practices by firms and individuals associated with a particular entity, or provide other services to any or such entities are prohibited to prevent conflict of interest, and accurate reporting of accounting practices. All of which were corporate infractions engaged in by Mr. Ebber's and his co-conspirators at WorldCom. 6. The E/R ratios of other telecommunications companies during the late 1990’s hovered around 50% or at best high 40%. If you were an investor, would you have invested in WorldCom? I probably would have.Despite the fact that WorldCom's E/R ratio seems to have been lower than its competitors , which should have raised a red flag in any potential investors m ind. However, like my decision to still invest in WorldCom despite its â€Å"too good to be E/R ratios†, many investors back then may have ignored what was obvious because WorldCom's â€Å"cooked books† from previous years all â€Å"seemed financially sound†, thanks to Ebber's and his co-conspirators great efforts at evading external auditors, fooling the public and its shareholders, and â€Å"muscling† junior employees to cover up its â€Å"shady accounting practices†.So naturally, any potential investor would probably back then have made the same mistake of investing in WorldCom. Obviously, not expensing largest operating expense â€Å"line costs† – incurred to gain access to other carriers networks to allow WorldCom to complete customers calls, as reported in its SEC filings will make its E/R ratio lower compared to WorldCom's competitors, resulting in an â€Å"inflated performance† – overstatement of earnings and und erstatement of operating expenses. 7. Contrast the roles of Vinson and Cooper in the case.Should Vinson have been charged with committing crime? According to the section â€Å"Resolution of Ethical Conflict† in the Institute of Management Accountants' Code of Ethics, how should employees proceed when under pressure by senior managers to engage in unethical behavior? As stated by James Comey, the U. S. attorney that prosecuted Ms. Vinson's case, â€Å"just following orders† is not an excuse to break the law. Why? Because, like many accounting professionals, Ms. Vinson knew right from wrong as it pertains to the prescriptive law of accounting ethical practices.In her own statement and admissions to prosecutors during the initial stages of her prosecution, and attempt to become a witness for the prosecution to gain leniency. (Pulliam, 2003). She (Ms. Vinson) stated that â€Å"each time she was ordered to â€Å"cook† or cover unethical accounting practices, she tho ught and hoped it will be the last time she caved in for such unscrupulous activities. Unfortunately, she kept on caving for years till the scandal was uncovered†. In light of the facts, and Ms.Vinson and Cooper's knowledge of right and wrong concerning the ethical practices of their chosen professions, it is appropriate for both of them to have been held liable for conspiring and engaging in such fraudulent activities as purported by WorldCom. As outlined by the IMA, accounting professionals in any company that are micro-managed, â€Å"muscled†, or coerced to engage in any fraudulent activities or witness any such improprieties, should first report the issue to an immediate supervisor that is not involve in such activities.In the event such option does not exist, one should then report the issue to a higher management staff that is not involved in such impropriety. it's also advisable for one to seek legal counseling with a private attorney about how to proceed in such matters n the event that reporting to an external body is imminent. Reference:PULLIAM, S. , Staff Reporter of THE WALL STREET JOURNAL Online, June 23, 2003| | Internal Control and Shady Accounting Practices Group 3 1. Why did accounting fraud occur at WorldCom? Fraud occurred at WorldCom for a variety of reasons. The senior executives had unchecked power because the board of directors were only figure heads, the ethics hot-line was nonfunctional, and in internal audit department did report to the appropriate link in the corporate chain to minimize fraud. These reasons, combined with a poor company culture, created the environment where fraud was able to become an acceptable business process. The senior executives at WorldCom had a â€Å"do it or else† attitude that was unchecked by any external force.That external force should have been the board of directors. Unfortunately the board of directors were being directed by the senior executives, given information about WorldCom that was disorganized to hide highly controversial and aggressive accounting techniques. These directors should have recognized they were being used and realized their agency to the stock holders to administer the oversight they were compensated to provide. The ethics hot-line, according to the case, while existed, was not known or trusted by the general population of employees at WorldCom.While many employees were aware of unethical activity, no of them felt that using this channel was a viable solution to addressing problems at WorldCom. Finally, the Internal audit department reported to the senior executive who ultimately steered their activity. If the executive was informed that internal audit was close to uncovering the unethical acts of managers, he directed their internal activity to other areas of the firm and blocked access to their department to the files that could expose the problem.If the internal audit department reported to the board of directors, better policing of executive activity would have been possible. All of these reasons had an element of poor culture in their makeup. Allowing senior executives to bullying their subordinates, inattentive directors, allowing for t he ethics channel to be nonfunctional, and accepting the unethical actions of seniors as the way things get done, ultimately doomed WorldCom to a spiral of actions that had the momentum of everyone's livelihood at stake, with no system in place to automatically apply the brakes to protect the shareholders. . What is the difference between earnings management (or earnings smoothing) and accounting fraud? What are the relevant criteria to use in distinguishing ethical from unethical accounting practices? I don't think there is a difference between earning smoothing and accounting fraud. Both practices intentionally mislead investors to alter their opinion of their holdings. Even if altering earning to smooth it out is mean only to put investors at ease, the underlying goal of smoothing is to change the perception of risk and volatility, which demand premiums in the market.Relevant criteria for distinguishing ethical from unethical accounting practices are if the accounting practice ma terially changes what the average investor values the company at and items addressed in GAAP and other accounting standards that are against conventional accounting guidelines actively used and unchallenged in the business landscape. 3. What internal processes or systems do you recommend to prevent fraudulent practices such as those present at WorldCom?Why were these practices not detected sooner? It appears WorldCom's fraudulent activities was uncovered by the companies own internal accounting department, indicating that at least one of five internal controls – â€Å"monitoring of controls† was functional. However, I believe if there were to have been periodic external auditing from impartial entities outside of WorldCom, the fraudulent activities would have been uncovered sooner than it occurred in 2005.Other internal control processes that could have prevented WorldCom's fraudulent activities and demise are; hiring competent, reliable and ethical personnel, particul arly in leadership positions that the company's board of trustees failed to accomplish, or perhaps were oblivious and complacent with the â€Å"red flag warnings† – falsely professed financial growth and profitability to increase the price of WorldCom's stock, and underreporting line costs (interconnection expenses with other telecommunication companies) by capitalizing these costs on the balance sheet rather than properly expensing them.In addition to inflating revenues with bogus accounting entries from corporate unallocated revenue accounts. I also believe there was failure with â€Å"assignment of duties†, or separation of duties if you will. Because, Mr. Ebber's seems to have been in control of his CFO – Sullivan, Controller – Myers, and Director of General Accounting – Yates. All of whom were unethical leaders at WorldCom that helped concoct â€Å"shady† accounting practices that led to the demise of WorldCom. It is my opinion t hat the above mentioned practices were not detected early enough due to micro management of lower taff employees by unethical leadership through autocratic style leadership, and environment that instilled fear in employees for fear of losing their jobs if any concerns were raised. An unfortunate reality that sadly exist in many big corporations, and even in governments. 4. What external processes or systems do you recommend to prevent and detect fraudulent practices such as those present at WorldCom? Were the directors on the board or the external auditors to be blamed?External auditing is an effective process that can in many ways prevent fraudulent activities within organizations, as the respective auditing teams have no â€Å"loyalty† to management or leadership within the company undergoing review by the external auditors. Retrospectively, I believe that the board of trustees of WorldCom at the time of the scandal would have wished that they had carefully looked into the background and leadership style of Mr. Ebber's and his co-conspirators to have checked for any signs of unethical behavior that many companies continue to blindly ignore.Barely about a year ago, Yahoo's former CEO was publicly humiliated, and subsequently fired by the company for â€Å"embellishing his academic credentials†. A very minor issue that could have been easily prevented, had the board of trustees of Yahoo looked thoroughly into Thompson's background by doing their due diligence. Unfortunately, the board of trustees of Yahoo failed at this task, much like what happened back in the late nineties with WorldCom and Ebber's. 5. You are a representative from the SEC.Briefly describe any sections of Sarbanes-Oxley Act of 2002 that you would cite to either Mr. Sullivan or Mr. Ebber's when they refuse to comply with your request for information. Under the federal regulations and securities Section 3(a)(47) of the Securities Exchange Act of 1934 (15 U. S. C. 78c(a)(47)), ref usal of any individual(s), or company(s) to conform to set accounting practices including external auditing by appropriate personnel (entities) will be liable to punitive actions set forth by federal legislations – up to or more than 25-years imprisonment and fines.Additionally, accounting and auditing practices by firms and individuals associated with a particular entity, or provide other services to any or such entities are prohibited to prevent conflict of interest, and accurate reporting of accounting practices. All of which were corporate infractions engaged in by Mr. Ebber's and his co-conspirators at WorldCom. 6. The E/R ratios of other telecommunications companies during the late 1990’s hovered around 50% or at best high 40%. If you were an investor, would you have invested in WorldCom? I probably would have.Despite the fact that WorldCom's E/R ratio seems to have been lower than its competitors , which should have raised a red flag in any potential investors m ind. However, like my decision to still invest in WorldCom despite its â€Å"too good to be E/R ratios†, many investors back then may have ignored what was obvious because WorldCom's â€Å"cooked books† from previous years all â€Å"seemed financially sound†, thanks to Ebber's and his co-conspirators great efforts at evading external auditors, fooling the public and its shareholders, and â€Å"muscling† junior employees to cover up its â€Å"shady accounting practices†.So naturally, any potential investor would probably back then have made the same mistake of investing in WorldCom. Obviously, not expensing largest operating expense â€Å"line costs† – incurred to gain access to other carriers networks to allow WorldCom to complete customers calls, as reported in its SEC filings will make its E/R ratio lower compared to WorldCom's competitors, resulting in an â€Å"inflated performance† – overstatement of earnings and und erstatement of operating expenses. 7. Contrast the roles of Vinson and Cooper in the case.Should Vinson have been charged with committing crime? According to the section â€Å"Resolution of Ethical Conflict† in the Institute of Management Accountants' Code of Ethics, how should employees proceed when under pressure by senior managers to engage in unethical behavior? As stated by James Comey, the U. S. attorney that prosecuted Ms. Vinson's case, â€Å"just following orders† is not an excuse to break the law. Why? Because, like many accounting professionals, Ms. Vinson knew right from wrong as it pertains to the prescriptive law of accounting ethical practices.In her own statement and admissions to prosecutors during the initial stages of her prosecution, and attempt to become a witness for the prosecution to gain leniency. (Pulliam, 2003). She (Ms. Vinson) stated that â€Å"each time she was ordered to â€Å"cook† or cover unethical accounting practices, she tho ught and hoped it will be the last time she caved in for such unscrupulous activities. Unfortunately, she kept on caving for years till the scandal was uncovered†. In light of the facts, and Ms.Vinson and Cooper's knowledge of right and wrong concerning the ethical practices of their chosen professions, it is appropriate for both of them to have been held liable for conspiring and engaging in such fraudulent activities as purported by WorldCom. As outlined by the IMA, accounting professionals in any company that are micro-managed, â€Å"muscled†, or coerced to engage in any fraudulent activities or witness any such improprieties, should first report the issue to an immediate supervisor that is not involve in such activities.In the event such option does not exist, one should then report the issue to a higher management staff that is not involved in such impropriety. it's also advisable for one to seek legal counseling with a private attorney about how to proceed in such matters n the event that reporting to an external body is imminent. Reference:PULLIAM, S. , Staff Reporter of THE WALL STREET JOURNAL Online, June 23, 2003| |

A Comparison of Antigones and Ismenes Reactions to Grief in Antigone by Sophocles

A Comparison of Antigone's and Ismene's Reactions to Grief in Antigone by Sophocles Response Paper to Antigone The tale of Antigone is one of the oldest pieces of literature that is still being studied today. The play is able to explore the psychology of many different characters as they are all forced to deal with the death Polyneices. While the differences between how Antigone, Haimon, and Creon respond to the situation may be widely discussed, another interesting relationship to analyze in the text is that between Antigone and Ismene. Both sisters experience a tragedy as their brothers kill each other, yet their responses are quite different. Antigone’s response to the grief is to focus on the injustice of the situation and risk herself to set things right, while Ismene is filled with sadness, yet fears the ramifications of breaking the law. Both responses are results of love, yet the specifics of each case allow a deeper look into the psychology of these characters. When reading and discussing the play of Antigone, Antigone herself is most often seen as the heroin. However, it could be argued that Antigone is the reason for the tragedy. If Antigone had expressed her grief with Haimon, it is possible that he could have convinced his father to lift the law against burying Polyneices body. Also, her rash decision to kill herself leads to the death of both Haimon and the queen as they are filled with grief. After thinking through the different endings that could have occurred if Antigone had responded calmer, it is reasonable to conclude that Antigone’s plan of rebellion was not the most practical response. Ismene, on the other hand, responds with grief but no action. It could be argued that this is a more practical response as it prevents any further harm, yet with Ismene’s response nothing is really fixed, it is all merely pushed aside as if it did not happen. After analyzing the practicality of the girls’ responses, the question of morality is raised. Was Antigone doing the right thing, standing up for her family and offering herself as a sacrifice? Or was Ismene correct in avoiding further conflict and simply grieving for the loss of her brother and his honor? This is a very difficult thing to analyze as the grief in this situation is almost unfathomable. It may be most reasonable to argue that neither girl was in the right mindset to make a moral, practical decision. They have just learned that their brothers have killed each other and one will die with honor, while the other may not. Thinking about this situation, it becomes clear that neither girl responded ethically nor practically, but they both responded emotionally according to their own personalities. The play Antigone by Sophocles includes multiple complex situations and relationships, and that of Antigone and her sister Ismene is one of the most intriguing. Watching these girls deal with the pain of losing their brothers and then deal with the pain of losing each other in disagreement over the situation makes the tragedy more powerful. Sophocles is able to include human nature in this situation as both sisters behave impractically and unethically. This is seen often in life as well as emotions overcome logic and may lead to even more tragic situations as those that occur in Antigone.

The Influence of Rewards and Intrinsic Motivation on the Turnover Dissertation

The Influence of Rewards and Intrinsic Motivation on the Turnover Intent at Bourne Leisure Ltd - Dissertation Example While most of the intrinsic motivational factors (work content, working conditions, and managerial support) along with employee benefits brought about positive responses, mixed findings were acquired in relation to the amount of pay along with recognition. It has been recommended that the organization focuses on both extrinsic and intrinsic rewards for employee retention. Background of the Study Turnover of employees has become a persistent occurrence that has led to adverse consequences for organizations worldwide (Collins and Smith, 2006). The loss of competent and qualified workers has been associated with the decrease of quality, innovation, productivity and performance with regards to a company’s delivery of service. Consequently, client dissatisfaction can be expected as well (Lin and Chang, 2005). Furthermore, according to Abbasi, Hollman, and Hayes (2008), employee turnover requires a considerable amount of costs attributed to selection and recruitment along with the training of new employees. Therefore, employee turnover has been considered as one of the most critical managerial problems in the current workplace (Pfeffer and Sutton, 2006). Given such unfavorable outcomes, it has become common for studies to focus on identifying the factors that contribute to employee turnover (Holtom, Mitchell, Lee, and Eberly, 2008). These findings from research are highly r elevant for organizations and their managers for directing their efforts towards reducing the rate of voluntary turnover among their workers. A wide range of studies in various fields, including psychology and economics, have led to significant findings for understanding employee turnover that include demographic factors, the relationship between the employee and employer, satisfaction with one’s job or work-related stressors (Griffeth, Hom, and Gaertner, 2000; Kuvaas, 2008; Podsakoff, LePine, and LePine, 2007). However, despite the considerable number of studies that aimed to explore voluntary turnover among employees, the direction of their outcomes widely differ based on the population or a given situation, hence implying that employee turnover is influenced by a wide range of predictors. One

SWOT Analysis of Smartlinc Inc Essay Example | Topics and Well Written Essays - 1000 words

SWOT Analysis of Smartlinc Inc - Essay Example Attracting the best and the brightest people is fundamental in the company as it has focused on the recruitment of a smart, successful group of employees who buy into the vision while challenging and motivating one another. The organization has taken much consideration for planning the launching of their smartphones. The initial stage of the planning process includes devising a SWOT analysis as a means of establishing a market position and maintain it to be the best in the industry.Smartlink’s smartphone presents a clear pattern of evolution from the brands presented by its competition. Some of the superior specs of the smartphones include new and better SoC, a high-quality camera, TouchID and a faster modem. The rear camera of the new smartphone has higher resolution photos and supports 4K video recording compared to other smartphones in the market. The smartphone also has a front-facing camera with a higher resolution. While most smartphones in the market have a 2 GB of RAM, Smartlink’s smartphone has a RAM of 4 GB. It also has an improved bandwidth and enhanced power. As such, the modem and the WiFi chipset are capable of a higher throughput and only use less power. Due to the ease with which smartphones are getting obsolete, this company seeks to design a new design of smartphones in which users can upgrade their smartphones to the next generation through the installation of a software. Smartlink Inc. prides in having an excellent team of employees who are highly competent in handling the design and infrastructure of the new smartphone.  

Research paper about lululemon Example | Topics and Well Written Essays - 500 words - 5

About lululemon - Research Paper Example His early promotional approach was to offer yoga instructors free yoga pants just to get their feedback on the flexibility of the pant. One of the main objectives in Lululemon is the creation of a fun atmosphere and a healthy living at the same time aiming at designing end products that offer high performance, comfort and fit. The company has a market-oriented focus that helps it to offer products that are of high performance, generates customers trust and commitment from the company in supporting the customer. Lululemon price of yoga pants averagely goes for ninety-two dollars. Lululemon is a company that runs with profits. The company worked hard to maintain its level in the market, and its prices earn many profits. According to its website, Lululemon is striving its best to serve its shareholders to the best. An average of seventy percent of the company’s total revenue in business is estimated to come from yoga were selling. What the company aims at is selling and pricing tits products in a way that it earns a profit in the end. In addition, the company makes use of a mixture of value and prestige in pricing strategies in determining the cost of its products. The strategy used for pricing on the company products includes the strategy of value added pricing and prestige pricing. In value added pricing, the company spends a lot in trying to create additional values in its products through promotion. Prestige pricing happens through adding extra features for its customers on their apparel instead of trying to reduce the total cost of by reducing the features used and the material quality used in producing the yoga pants products. The use of unique features in manufacturing the yoga wears made by Lululemon, such as the use of natural substance clothing in production of yoga pants, helps in justifying the high prices of the Lululemon’s pants in the market. On the other hand, the company also employs the use of prestige in pricing

Wastewater management Research Paper Example | Topics and Well Written Essays - 500 words

Wastewater management - Research Paper Example In an era where people in the communities are gaining more knowledge about issues of the environment and their impact on the globe, it is everyone’s responsibility to use, establish and put into practice inventive ways of managing wastes and resources (World Resources Institute, 1996). Wastewater refers to water that has been hugely affected in condition by the influence of anthropogenic. These constitute liquid waste produced by industry, domestic properties, agriculture and/or commercial properties and can take in an extensive variety of probable concentrations and contaminants. Moreover, municipal wastewater is frequently treated in an effluent sewer, sanitary sewer, septic tank or combined sewer. It is likely to establish an association between contaminants of waste in a wastewater watercourse, but such a correlation cannot be simplified for operation with any additional wastewater course or waste impurities. This is because the constitution of any wastewater course is dissimilar (World Resources Institute, 1996). Many of the country’s sewer and water infrastructures were devised and constructed in the early days. These systems were made with a short life period in mind. Currently, as a result of this, there is a shortage in communal facility spending. This imposes heavy costs of repair for the future generations. The present water and sewer infrastructure cannot sustain the growing human population or exist for a long time without the need for thorough rehabilitation. Aging infrastructure and increasing amounts of waste water are increasing the cost of obtaining clean water. In addition, the environment is increasingly being affected negatively by these factors (World Resources Institute, 1996). It is not healthy for wildlife, domesticated animals, and human beings to get into contact with ground or surface water that is contaminated with waste or drink it. Wastewater management is an essential function in upholding

America in Transition 1801-1848 Assignment Example | Topics and Well Written Essays - 500 words

America in Transition 1801-1848 - Assignment Example President Jackson asserted that removing the Indians was necessary in order for them to maintain their culture, which could not be possible if they mixed up with the Americans. He announced that the two major tribes of the Indian community had already agreed with the terms for their removal, and supported this by saying that this was a good example to the rest, who would soon follow the same path as they seek similar compensation (Lewis 2001). The building of the Erie Canal illustrated the confluence of a vision. It took 15 years to be completed beginning from 1817 to 1832. It was viewed by many as the dream of Washington, who is believed to have a great understanding of the significance of transport and communication in nation-building. However, he did not live to see the completion of the canal (Bernstein 2005). It created a significant landing point for the sea vessels at New York City. The river barges were used for transportation of the cargo from these vessels to far places such as Chicago. The canal facilitated the growth of the New York City which became a major port in the United States. With time, Chicago also followed similar developments as in New York City. The population of the two cities rose as the two cities became the largest of all the cities in America. Construction of the canal received public support, notably from particular public officials who according to (Bernstein 2005) included â€Å"people such as Morris, who represented the first Continental Congress†. Bernstein further notes that the public was excited regarding the canal as they saw it as a major step towards achieving prospects of acquiring the capability of transporting commodities which included salt and others such as gypsum to far places through it. This was not possible before the construction of the canal. There used to be no trading activities between merchants from the East and the West.

Soy Food and Semen Quality Essay Example | Topics and Well Written Essays - 1000 words

Soy Food and Semen Quality - Essay Example This paper also provides brief summaries of the articles for easy analysis and understanding of the subject matter. The article reports the inverse relationship between the consumption of soy products and isoflavone compounds with respect to sperm count. It states the findings of the original research that men who consumes soy food at an average of one-half serving per day will likely to have lower concentrations of sperm cells. It also highlights that the effects of soy products on sperm productions are heightened on people who are obese or overweight. The article reports on the results of the experiments on animals and points out that there is insufficient evidence that will prove the effects on human reproduction at this point. It also mentions the 15 soy-based foods that were used by Dr Jorge Chavarro and his colleagues on their research: "tofu, tempeh, soy sausages, bacon, burgers and mince, soy milk, cheese, yoghurt and ice cream, and soy products such as roasted nuts, drinks, powders and energy bars."(1) It also relays the conclusion of the research which stated that the inverse relationsh ip between the soy products and sperm count is more evident on people with higher sperm concentration and who are overweight. B. Research Article: Soy food and isoflavone intake in relation to semen quality parameters among men from an infertility clinic Previous researches prior to their study proved the adverse effects of high concentrations of isoflavone compounds which are found on soy-based products on animals but data on its effects on human beings are limited. Chavarro et al. (2) test this relationship on human beings through semen analysis. The semen samples came from 99 qualified male donors and where analyzed at Massachusetts General Hospital Fertility Center. These men were also asked to provide information on their diet involving the 15 soy foods during their last 3 months of consumption. For the statistical analysis, they used linear regression on the male consumption of soy foods and quantile regression for the sperm concentration distribution. The results show that there is an inverse relationship with the soy food consumption and sperm concentration. The results were more seen on the 90th and 75th percentile or those with higher sperm concentrations and on the obese males. The authors conclude that higher intakes of s oy foods and soy isoflavones are related with lower sperm concentrations among males. III. ASSESSMENT For the truthfulness of the media report based on the original research article, the news article has reported the relationship between intakes of soy products with sperm concentrations similar with the findings of the research. The report has cited the important facts in the research study that will prove the linkage of soy foods and sperm concentrations. However, the research article did not focus much on the actual serving size of the soy products but more on the amount of soy food intakes. Although the survey that they used on getting

Critical thinking Essay Example | Topics and Well Written Essays - 1000 words - 4

Critical thinking - Essay Example interventions in Iraq, Kuwait and Afghanistan could expose much severe similar incident - says the article. President Obama claims to achieve a significant saving of atleast U.S.$ 40 billion dollars an year through strong interventions in the contract awarding process. According to the reports, abolishing no-bid contracts and reducing the outsourcing level of government works to the private agencies are the major ones in the proposal. The articles communicates clearly the commitment of Barack Obama by emphasizing that the money from the people of America need to be utilized to satisfy their priorities rather than allowing it flow through the drains. The necessity of radically transforming the feeble system of contracting also adds to the Obama’s interest to provide a good public administration. The initiatives taken by the present President includes issuing clear directions to his Budget Chief for evolving appropriate guidelines to evaluate the existing contracts for their via bility. Based on which they could be either modified or even cancelled. In addition, the Budget director is also asked to strictly monitor the entire no- bid contracts and the operations of the private companies working with the government also would give a fresh impetus into these things. The article substantiates the President’s claim with very clear figures. The award of contract for undertaking the restoration work of Iraq’s Oil production was through non-competitive manner to then Vice-President Dick Cheney. And, spending of millions of dollars without proper accountability in Iraq and Afghanistan, over spending in over 95 defence projects are some of the few specific references made by him. As per the content in the article, the message Obama spreads is very clear. Contracting works would no longer be in a flexible budget form, the fixed price of the contacts would soon force all the contractors to assess their costs in a realistic manner. The

Ethics Goes To Hollywood Essay Example for Free

Ethics Goes To Hollywood Essay When we think of ethics with regards to Hollywood, some people might even question if there really are any left? With the growing number of moralists and critics that easily target Hollywood, ethics has become an important factor that seems to be set aside. Many of the movies that are being shown today presents violence, nudity and lack of values incorporated with the film. But there can always be an argument about how is ethics really perceived through the movie industry? Some might doubt but actually when we look pass through over-all violence and those unacceptable factors to moralists, some movies do posses ethics in them. Most of the time, those ethics are just overlooked by the over-all presence of the movie. When we analyze and breakdown a movie and study the characters there is a great opportunity to realize the moral fiber of the film. In recent memory, there are only a few movies that have produced an unusual style of presentation in the silver screen. One of those movies showed up during 2007 through a film titled â€Å"300†. It was based from Frank Millers graphic novel also named â€Å"300†. This movie adaptation of the novel is also based from the Battle of Thermopylae that was retold in a fictional sense. To further analyze the movie, the following paragraph will showcase the movies summary. Beginning with the presentation on a how a Spartan boy grows up and how he emerges to be king of Sparta, the movie was narrated by Dilios, a spartan soldier who was able to live and tell the tale. After years of being Spartas king, Leonidas received a messenger who was sent by the Persian ruler Xerxes. The messenger presented an offer that enraged king Leonidas, leading the messenger kicked down a seemingly bottomless pit. The message was sent clear, the Persian army is about to come, to invade Sparta and add it up to their growing territory. King Leonidas then consulted the Ephors, priests who consult the oracle for answers from the gods. Proposing a plan to block the Persian army by defending the Hot Gates of Thermopylae, King Leonidas was furious by the Ephors advice of not to fight because the oracle said that it was forbidden and the gods will get enraged if they do. Despite all of this, Leonidas stood strong with his firm decision to defend the Hot Gates. He gathered 300 of the greatest Spartan soldiers and assembled a party that would hold off thousands of Persians. As they have reached the Hot Gates, they defended it for days just to protect Sparta. King Leonidas courageously led the way by standing strong to his principles until the end. The number of the Persian army was too much for the 300 Spartans and eventually led to their deaths. Only one soldier was tasked to return to Sparta to tell the tale, Dilios, who forever made Leonidas and the 300 Spartans, remembered. LEONIDAS AND HIS VIRTUES The whole essence of the story evolved in Leonidas answer to his ethical dilemma that concerned with his decision to push through despite a number of people prohibiting him. One example was when he was discouraged by the Ephors or priests to pursue his plan because it was the time of the Carneian festival. His ethical dilemma would be is that if he pushes through with his plan, he would be disrespecting the Carneian but he would be able to salvage some time to defend Sparta. Despite the senates disapproval of sending the whole Spartan army, Leonidas faced his dilemma by standing strong with his beliefs and forming an army of 300 to continue his plan. Another example would be seen during the scene where the Persians were negotiating with Leonidas. First was during the arrival of the Persian messenger who offered Leonidas salvation of the Spartans from the Persian army if he yields. Another was during their stay at the Hot Gates, when King Xerxes himself talked to Leonidas personally and again proposed to have them spared if he yields to the Persians. Both of these instances presented a same result, Leonidas refusing to give up and standing strong to his principles. Choosing the side of whats right than whats wrong, suggests Leonidas firm ethical correctness and proper morality virtues. OTHER ETHICAL THEORIES PRESENTED Egoism is also depicted in the movie as seen in Xerxes motivation to rule and conquer the world. His actions towards self-interests boost his drive to invade and gain territories. In one instance, he even called himself the king and ruler of the world. A little bit of Egoism can also be attributed to Leonidas. His strong desire to win and his confidence to bring only 300 soldiers despite knowing that his enemy would be thousands in number suggests a showing of Egoism. CONCLUSION When we analyze the definition of ethics we easily incorporate it with whats write and whats wrong. Most of it solely depends on how we make that decision. The movie â€Å"300† despite its over-all violent nature still possessed that essential factor of morality and the integration of ethics through the characters, most especially Leonidas. Being the Spartan king, his decision to protect his kingdom by defending the Hot Gates despite disagreements by the senate and the priests caused his ethical dilemma. By overcoming this dilemma and choosing what he knows is right, it created a chain of events that lead to his popularity and immortality through the help of the story thats still known up to today. Despite Xerxes tempting offers in order for him to surrender, Leonidas strong principles carried him all the way to legendary proportions. Driven by a kings instincts, Leonidas died for the people of Sparta which caused them to be more inspired and more driven to defeat the Persian army that arrived pass the Hot Gates. All in all, despite Hollywoods descending reputation in accordance with moralists, people can still find ethics in movies. People just need to look pass through and analyze the details to get the even bigger picture. References Mackie, J L. (1977). Ethics: Inventing Right and Wrong. New York: Penguin Books. Simpson, R. H. (1972). Leonidas Decision. Phoenix (Vol 26, pp. 1-11).

Effects of Central Bank Independence on Inflation Rates

Effects of Central Bank Independence on Inflation Rates Abstract This paper analyses and explains the effects of central bank independence on a countrys inflation rates and its economic performance thereafter. It deals with the benefits believed to come along with independence and the delegation of monetary policy to the central bank, the determinants and accuracy of the index of central bank independence (CBI), and the different impact that CBI has on developed and developing countries. The studies and test conducted have shown that CBI lowers inflation in developed countries but in developing countries it might have the reverse effects, mainly due to the degree of independence, and factors like traditions, the law, and the statue of the economy which vary across countries. 1. Introduction This paper intends to study the relationship between central bank independence (CBI) and inflation levels among different countries; developing and industrialized. The main research problem that I intend to examine is whether central bank independence can lower the inflation rates of the countries that grant independence to their central banks, and whether this can lead to improved economic performance. What is discussed in this paper is not only whether central bank independence (CBI) can lower inflation and hence inflation variability, but also whether this can be achieved at low cost. The economies presented in the study include both those of the developed countries, e.g. the U.K., as well as those in transition e.g. Russia that have recently gained entrance in the EU. In this paper I analyze the impact of CBI on inflation, the benefits that are believed to come along with CBI and the factors used in measuring CBI. You will see that CBI can have different forms of measurement that produce slightly different results, hence the effectiveness of the CBI index is also analyzed. The reason for choosing this topic for further study is simply because during the past two decades there has been a considerable move towards central bank independence across several countries, with the belief that this will improve their inflation levels and thus contribute to economic growth. However, as you will see further on, this is not always the case, as some studies have revealed contradicting results, and economists and academics continue their studies to get a clerer picture of this issue. 2. The Spread of CBI and The Reasons for It To begin with, it is amazing how fast CBI has spread among countries and governments since the late 1980s. One simple explanation of this spread is A.Alesinas (1988; 845) statement: independent central banks have been associated with a lower average inflation rate and may have been responsible for reducing politically induced volatility of monetary policy and inflation 2.1 Should a central bank become independent? Folder (2005) explains that CBI was adopted to avoid possible disputes between political parties as a central bank is seen as a provider of information. Many economists have expressed their opinion on the spread of CBI; others have linked it to a way of avoiding the blame of political failure by some governmental parties (Miller, G. 1998, White 1994). Others have linked it to the infrequent changes of the government (de Haan and vant Hag, 1995). That is, central bank independence in many cases was adopted after periods of high inflation in order to reduce it, due to the inflation targeting function a central bank is capable of pursuing. It can also be associated with the attraction of foreign investment and hence economic growth as a consequence of the targets set and the autonomy with which the bank can then operate (Maxfield, 1997). In countries within the European Union, CBI is a perquisite following the Maastricht Treaty (1992) for adopting the euro currency. Overall and according to Folder (2005), independence has always been related to the adoption of anti-inflationary measures for pursuing monetary policy, but its explanation lies within the sociology of the financial elites and the politics legitimizing their policy preferences. The reasons behind achieving price stability through gaining central bank independence, Cukierman (1996) explains are several and include; the breakdown of other institutions like the European Monetary System (EMS) that had been responsible for maintaining price stability which is considered as the single and most significant objective of a central bank. Ilieva and Gregoriou (2005) suggest that in transition economies central bank independence has increased mainly due to the desire of such countries like e.g. Czech Republic, Poland, Romania, etc., to join the European Union and the acquis communautaire that applicant countries should adopt. As they continue to reason the addiction to CBI, they add that another incentive for CBI is the international financial institutions such as the IMF (International Monetary Fund) that require certain criteria to be met before making unconditional loans, and these criteria are feasibly met with the help of CBI. Also, countries are attracted to CBI as this will attract potential investors by improving the nations creditworthiness. Cukierman, A. (1996) analyses developments since the late 1980s to the legal independence of central banks and to its meaning; the measurement of CBI, the interaction of central banks with the government, its effect on the economy, its determinants, etc According to Cukierman, the trend towards CBI is due to a quest for price stability which is due to the following two reasons: First, following the stagflation of the seventies and the adverse economic performance of some high inflation countries, in Latin America and elsewhere, conventional wisdom concerning inflation and real growth has changed. Whereas during the sixties the accepted view was in line with Keynesian dogma, that some inflation is good for growth, during the eighties and nineties became that inflation and the associate uncertainties retard growth. (1996; 3) The good economic performance of Japan and Germany, countries with already low inflation added more value to the above concept. Second, the rapid growth and internationalization of capital markets raised the importance of price stability as governments and private investors sought to enhance their access to broadening world financial markets. (1996; 3) 2.2 Types of Central Bank Independence Independence with regards to central banking can be categorized into different groups, depending on the degree of freedom and the subject from which the central bank becomes independent. The major types of independence are; Legal independence, where the bank is partly accountable to the government and legislation provides a framework within which the central bank and the government cooperate on certain issues. This form of independence varies significantly among countries as it depends on how strong in the law in each country and the degree to which it is followed. However, the degree of legal independence, namely LVAW, as it will be shown below, has been used by many as a major index of measuring the degree of CBI. Goal independence refers to the case where the central bank is allowed to set its own goals, e.g. price stability, money supply, inflation targeting. However in most cases under this type of independence, the bank will decide on its goals with the confirmation of the relevant governmental departments. In this way, goal independence helps avoiding conflicts among fiscal and monetary policies, and increases the level of transparency and credibility of the central bank over its goals. Operational independence is the most common form of independence and is followed by many central banks around the world, for instance, the Bank of England since 1997. It involves the government setting the banks goals e.g. a 2% level of inflation, but the central bank being free to choose the instruments e.g. interest rates, to meet the targets set by the government. Another form of independence is managerial independence, by which the central bank has the power of appointing its own stuff, set its budget, etc. This form is a necessity for the existence of the other abovementioned forms of central bank independence and is therefore granted to all central banks that can call themselves independent. 2.3 The case for central bank independence There is a huge surge towards central bank independence by both the public and the governments, in the belief that independent central banks will not only achieve low inflation rates and price stability, but will subsequently lead to long-term economic growth and development. However CBI is an issue that needs further research before determining whether it should be adopted by all countries. This depends on the economic state of the country, whether it is a developed or a developing country or even on the demand of autonomy by the political parties within the country since by granting independence the government must pass to the bank the responsibilities of e.g. controlling the interest rates, etc. over which it used to have the power. Another issue that needs to be examined before granting independence to a central bank is the political stability and the degree of uncertainty within the country. This is because in times of uncertainty and instabilities, e.g. prior to elections, the public favours CBI as an independent central bank is more objective in its role and always forward looking without ignoring the long-term effects of its decisions. The majority of the parties affected by the actions of an independent central bank, i.e. the government as well as the general public are attracted by CBI because of the greater accountability and transparency the bank is equipped with when adopting a greater degree of autonomy. Moreover, it is expected to bring lower levels of inflation and this is the main reason why people welcome CBI and the number of central banks becoming independent has been increasing over the years. The main reason behind this expectation is because a central bank generally acts in favor of the public and in addition to the fact that it becomes free from the government and any political pressures, it is in a position to avoid short-term temptations regarding low interest rates which the government usually uses prior to electoral periods, for the sake of long-term low inflation and price stability, which in combination with other exogenous factors can result in economic growth. Moreover, when a central bank gains its independence through institutional reform it becomes capable of appointing its own governor thus it moves away from political interference, and can also set an explicit inflation target. Additionally and as Carlstrom, T.C. and Fuerst, S.T. (2006) explain independence helps a central bank in constraining the behavior of fiscal authorities. That is, it can prevent people and especially the government following fiscal policy from acting in their short-term best interests, recognizing that any actions taken in the short-term e.g. lowering the interest rates to attract investments, may become undesirable in the long-term, e.g. rising inflation levels as with higher demand from low interest rates, the prices will likely increase. In this way, CBI also prevents the fiscal authorities from inflating the short-term for delivering e.g. favorable exchange rates. Hence, monetary policy can run in a more credible way and following the targets set, markets w ill know what to expect thus shocks will be limited. However an independent central bank is also likely in extreme cases to bring so low levels of inflation that can be harmful to the economy. According to Epstein, G. (2007), the 3.5% drop in inflation levels by countries adopting an inflation-targeting monetary policy (IMF, 2006) is questionable as to whether this decline will improve economic growth. Explicitly, if the inflation level of a country is already low and the central bank adopts an inflation-targeting monetary policy then the resulting lower inflation level might prove dangerous to the economy by generating economic cycles. Cukierman (1996) has developed two separate approaches for reasoning the urge towards central bank independence and explaining the benefits that can be enjoyed from independence. These include; the theoretical approach according to which in the short-run monetary policy can be conducted in such a way that it allows for some inflation so that it can achieve employment, high economic activity and low interest rates. Hence, policy makers can expect some degree of inflation which they will present in the form of nominal wage and capital market contracts. In this way however, policy makers will have to keep inflation at a level that would balance the real equilibrium if they had been committed to zero-inflation. As a result of this discretionary use of monetary policy, this is subject to inflationary bias, and this bias can only be minimised if monetary policy is delegated to an independent central bank because only this institution is free to choose how to operate monetary policy and takes interest mostly if not only to price stability. And the empirical approach by which the case of CBI lies on empirical evidence showing that countries with an independent central bank have lower inflation rates and higher growth rates per capita output. An example of such a country is New Zealand: 2.3.1 The case of New Zealand New Zealand is a country whose central bank managed to drop the inflation level after being granted with greater independence. The Reserve Bank of New Zealand was granted independence in 1989 following the Reserve Bank of New Zealand Act of 1989 and had therefore established an explicit inflation target. The result was to reduce inflation levels from 7.6% during the years 1955-1988 from when the reserve bank was not independent, down to just 2.7%, after becoming independent, during the period 1989-2000. The latter rate is now considered one of the lowest among industrialized countries. It is obvious that among all OPEC countries, the central bank of New Zealand managed to achieve the lowest inflation rate, especially during the 1990s. What happened during the period of the inflation reduction was that the reserve bank of New Zealand went through a reform that resulted in it being granted with independence and a greater degree of autonomy, leading to low inflation. Specifically, prior to 1989 it used to be an arm of the government. Monetary policy used to be subject to the ministry of finance and therefore the government. As a result, the level of independence was one of the lowest among industrialized countries, while the level of inflation was of the highest. Even then, the relationship between central bank independence was negative, even though the results were the reverse of what is considered optimum, i.e. greater independence, lower inflation. In 1989, the Reserve Bank of New Zealand Act was passed by law. This act codifies inflation targeting and gives more autonomy to the countrys central bank in order to meet its objectives. According to the Act the central banks primary function is: to formulate and implement monetary policy directed to the economic objective of achieving and maintaining stability in the general level of prices. (Reserve Bank of New Zealand Act, 1989 as quoted in Carlstrom T.C. and Fuerst, S.T., 2006, p.3). The impact of the Act on New Zealands economy and specifically the Reserve Banks autonomy can be seen in figure 2 below, which compares the degree of independence across different time periods and among different countries. The findings of the New Zealand case show that if the country had adopted independence earlier then its average inflation rate would be 3.4% rather than 7.6% that it actually used to be, assuming all other things being equal. Following this assumption, CBI itself would be sufficient to reduce worldwide inflation levels from 5.6% down to 3.8%. Despite the considerable drop in New Zealands inflation rate it is still questionable whether this drop was caused solely by CBI, and it is difficult, if not impossible, to quantify by how much the inflation reduction was due to CBI. Firm conclusions cannot be made yet since the data used in this case is of limited sample size and comparisons would therefore be insufficient. What is true is that the relationship between CBI and inflation is similar across time. Any changes to the strength of this relationship are mostly due to macroeconomic and other factors such as the state of the economy, the state of the government, e.g. democracy, etc. and others that will be explained later in this paper. 3. Measuring Central Bank Independence The degree of CBI for each central bank varies according to the state of each country and to compliance with the law. As Cukierman explains, in developing countries where compliance with the law is poor, a suitable proxy for CBI would be the turnover of central bank governors, whereas in industrialised countries such a proxy would be legal independence. Generally, when the appropriate index of independence is used, the results indicate an inverse relationship between CBI and inflation. However, care should be taken not to mistake legal independence with actual independence, as legal independence is necessary but does not guarantee actual independence; legal independence is a necessary, but not a sufficient condition for a truly independent CB. (Cukierman, A., 2001; 7). Exceptions exist, like developed countries, where legal independence seems to be a good proxy because law is highly complied. For a clearer picture of the effectiveness of CBI on the economy, it is preferred that some variables that make up the CBI index are used in combination, or that some indices are used only for a specific purpose. For instance, legal independence is a good proxy for actual independence in developed countries rather than in developing ones. 3.1 The Cukierman Index of CBI The method that will be used the most in this paper to measure the degree of central bank independence and its relationship with inflation will be Cukierman Index (1992), the most widely accepted and used index for this purpose. Initially, the exact definition of the Cukierman Index according to Siklos, P. (1992; 65) is: An indicator of the degree of autonomy enjoyed by several central banks. Cukierman Index to demonstrate graphically the measures of CBI and inflation during two different decades, namely the 1980s and the 1990s: As can be seen in the above graphs during the 1980s even though CBI was not common across countries, there was a negative relationship between CBI and inflation level. This means that the greater the level of independence of a central bank, the lower the level of inflation within the particular country. It is thus obvious that the correlation between CBI and inflation is negative, whereas the errors overall are not fitted closely on the regression line. We should note however that the decade of 1980s was before central banks especially those within industrialized countries underwent major reforms in their statutes which then allowed them a greater degree of autonomy. During the 1990s as Siklos, P. (2002) explains, most central banks went through a reform, as there was a trend towards CBI. As a result the overall degree of CBI increased and all index values were revised upwards, the government granting more autonomy to central banks, in the belief that greater independence would just be adequate for lowering the level of inflation. However, the relationship between CBI and inflation during the 1990s turned out to be the reverse of that of the previous decade. That is, the correlation between CBI-inflation now became weaker but positive since the regression line on the scatter gram in figure 3b has an upward slope, meaning that inflation increases with the degree of independence. It is hard to explain what was wrong with the findings of the 1990s that caused the correlation to be positive, however one might argue that CBI increased for all countries during the 1990s and so it also reflects the inflation performance of the previous decade, although the more independent central banks have delivered lower inflation levels in the 1980s. Furthermore, the Cukierman Index used is believed to contain some inaccuracies concerning the measurements of the degree on independence and thereafter the relationship of that with inflation because it was extended from the 1980s towards the 1990s in a different way than the one initially specified. For this reason more tests will be carried out to explain and compare the effectiveness of measuring CBI using the Cukierman Index in contrast to other indices developed for the same purpose, for instance Alesina and Summers Index. The Cukierman Index will also be used to test the effect of CBI on inflation in transition economies, based on Ilieva and Gregoriou (2005) paper regarding inflation performance, i.e. average inflation and inflation variance, and CBI in transition economies during the period 1991-2003. 3.2 The determinants of the CBI index The degree of independence varies across countries. This is not only due to factors such as the type of independence of each bank, although the most common is operational independence, the degree of law compliance in each country, and tradition, but some other systematic factors as well. Such factors are described and categorized by Cukierman, who presents some hypotheses on these factors: Hypotheses about the determinants of CBI Initially, it is widely accepted that any form of inflationary bias raises the independence of central banks to the degree that politicians wish to grant to the CB. The main idea behind this concept is that the benefits of delegating monetary policy to an independent central bank will be higher when inflation bias is higher in instances of e.g. employment reaction to inflation shocks. This delegation according to Cukierman helps in preventing the competing political party from taking on activities not favoured by the government. Secondly, Cukierman et al (1992, 2001) make the hypothesis that: the wider are the financial markets and the more elastic the supply of funds to government with respect to the interest rate, the more likely is the CB to be independent. (2001; 19). Additionally, Maxfield (1995) supports that political authorities favour CBI where there is need for funds. When this need is high as he explains, the government delegates more authority to the central bank in order to signal the nations creditworthiness. Finally, the cases of countries that have experienced extremely high levels of inflation in the past, like Germany, Austria, and Brazil, show that such countries are more likely to delegate independence to a central bank so that politicians do not interfere with monetary policy. 3.3 The measurement of the CBI Index Due to the widespread concept that the degree of independence of a nations central bank plays a crucial role upon the policy actions and inflation, Cukierman (1992) presents an analysis of the effects of CBI on inflation and provides various indicators of CBI. However, as he explains, the degree of CBI is determined by several factors from legal to cultural some of which are difficult to measure and quantify, therefore the impact of CBI on inflation varies among countries and there is a certain degree of uncertainty about the level of CBI. As a result, the measurement and the creation of an index of CBI have been based on legal independence, as the degree of CBI also depends on the degree of independence granted to the bank by the law. Despite the variations in the degree of CBI, it can be deduced that a low degree of CBI is linked with higher levels of inflation and inflation variability, while the level of credibility of a central bank with a low degree of CBI will be lower. Cukierman presents three different sets of indicators of CBI; a proxy for legal independence and proxies for the deviations of actual from legal independence. Independence measured under these proxies is limited specifically to the Central banks ability to meet a single objective; price stability. The reason for using several proxies in measuring CBI is because each proxy is a noisy indicator that captures a somewhat different aspect of CB independence (Cukierman, 1992; 370), so using a combination of them reduces this noisiness of the overall measure 3.3.1 Measuring and Coding Legal Central Bank Independence Using a proxy of legal independence is vital in making comparisons with previous studies on the impact of CBI on economic issues because all existing attempts on the features of an independent central bank rely on the banks legal independence. Cukierman presents the indices of legal aspects of CBI by separating into four groups the variables which make for a legally independent central bank. These groups are: Chief executive officer: CEO Policy formulation: PF Final Objectives: OBJ Limitations on lending: LLand codes them by the degree of independence of each group for the central bank of each of the countries included in the study. The main assumptions made are; the central banks whose single objective is price stability are considered to be more independent, so are central banks with stricter limitations on lending from the CB. The coding involves sixteen different variables in a scale from 0 (least independence) to 1 (maximum independence), during the time period 1950-1989, separated into four different decades. Due to the narrow definition of each of the variables used and the consequent lack of precision and multicollinearity problems that may arise, these variables are aggregated into eight legal variables by just calculating the unweighted mean of the codings used. Furthermore, it is necessary to have an additional single index of legal independence for each country to assess the aggregate legal independence of the CB. This index can have two alternatives, the LVAU and the LVAW, that are computed by calculating the average of the codings of the first eight variables as described above. Table 1 in Appendix A shows the ranking of the countries according to the legal independence of their central banks as measured by the LVAU during the eighties decade. The LVAW would also give a similar picture. Looking at the table of results one can see that among the seven most highly-ranked countries four are developed (Switzerland, West Germany, Austria and U.S.), while among the seven least-ranked countries four are less developed (Morocco, Panama, Yugoslavia and Poland). Generally, the top 10% of the rankings is comprised of developed countries, whereas the bottom 10% is concentrated with less developed countries. One should also note that there had been no hyperinflation experienced by developed countries during the 1980s, while some of the Latin America countries have, e.g. Brazil and Bolivia with a rate of 230%. This according to Cukierman may suggest that legal CBI may be neither necessary nor sufficient for low inflation. (1992; 382). 3.3.2 The turnover rate of Central Bank governors as a proxy for actual independence As already explained, the legal status of the central bank is just one of the several determinants of actual CBI. There is no clear systematic indicator of actual CBI, but Cukierman (1992) presents two sets of such indicators. One is based on the actual turnover rate of the central banks governor, and the other is based on the answers given to a questionnaire on CBI. Table 2 in Appendix B shows the CB governors turnover rates for the period 1980-1989. It is assumed that the lower the turnover rate the higher the degree of actual independence. Although the results are chronologically old, it is obvious that turnover rates in less developed countries occupy a range that has never been experienced by developed countries. It is indicative that more than half of the less developed countries have a turnover rate higher than the maximum of the rate of developed countries. It is clear that less developed countries experience higher inflation rates, on the grounds of lower actual CBI. On the other hand, low turnover does not necessarily imply a high level of CB independence on the grounds that a relatively subservient governor will tend to stay in office longer than a governor who stands up to the executive branch. (Cukierman, 1992; 385) Critically assessing the results, since the maximum turnover rate for developed countries is 0.2 (.e. five years) suggests that the turnover proxy may not be effective proxies for actual CBI for the sample of developed countries, whereas this proxy can be considered indicative for the sample of developing countries since these have turnover rates exceeding 0.2. 3.3.3 Central Bank Independence from answers to a questionnaire Another aspect of characterizing CBI is the questionnaire. Under this method, answers were obtained from qualified central bankers from twenty-four countries during the period 1980-1989. The main questions asked covered the issues of; legal independence, final monetary policy objectives, monetary policy instruments, actual independence and its divergence from the law and intermediate targets and their indicators. In coding the variables of the questionnaire, the bank is assumed to be more independent, all other things being equal, if the following hold; the term of office of the CB governor is longer than that of the government, limitations exist on lending from the CB which the government is in no position of altering, and in cases where stock targets exist because these mean that the CB is more free to meet its price stability target. Table 3 in Appendix C shows the ranking of central banks by aggregate indices of independence according to questionnaire responses. The aggregate indices of QVAU and QVAW reflect the law and the way it is implemented in practice respectively, as well as important information about actual independence, and are very similar (à ?=0.99). The rankings agree to earlier studies that central banks of developed countries are more independent. However, the median of QVAU for developed countries, that is 0.6 for Britain and Lebanon, is greater than the median for less developed countries, that is 0.49 for Uruguay, and this contradicts the above findings for legal independence using the LVAU. When measuring the degree of CBI it should be taken into account that the measures used above fail to quantify all the aspects of CBI as some are difficult to quantify. Such aspects are the quality of the banks research department and its standing in comparison to other economic research institutions within the public sector (Cukierman, 1992). Independence is generally higher in countries with highly-developed financial markets according to Cukierman because the supervision of financial institutions is under the authority of the CB, so the larger the market the more wide the span of the CBs authority. 4. Central Bank Independence and Inflation Targeting In this section the impact of central bank independence on inflation, inflation variability and the economy overall is analyzed using a model to test whether CBI can actually lower inflation, and comparing the effects of CBI by using both the Cukierman and the Alesina indices of CBI. Additionally, the costs of achieving lower inflation through central bank independence are also explained. MacCallum, B. (1995) believes that it is strong will that is necessary for proper policy behaviour by central banks, not rules and regulations. A policy maker, i.e. a central banker in this case should act immediately to an inflation shock to restore the problem without letting any sp Effects of Central Bank Independence on Inflation Rates Effects of Central Bank Independence on Inflation Rates Abstract This paper analyses and explains the effects of central bank independence on a countrys inflation rates and its economic performance thereafter. It deals with the benefits believed to come along with independence and the delegation of monetary policy to the central bank, the determinants and accuracy of the index of central bank independence (CBI), and the different impact that CBI has on developed and developing countries. The studies and test conducted have shown that CBI lowers inflation in developed countries but in developing countries it might have the reverse effects, mainly due to the degree of independence, and factors like traditions, the law, and the statue of the economy which vary across countries. 1. Introduction This paper intends to study the relationship between central bank independence (CBI) and inflation levels among different countries; developing and industrialized. The main research problem that I intend to examine is whether central bank independence can lower the inflation rates of the countries that grant independence to their central banks, and whether this can lead to improved economic performance. What is discussed in this paper is not only whether central bank independence (CBI) can lower inflation and hence inflation variability, but also whether this can be achieved at low cost. The economies presented in the study include both those of the developed countries, e.g. the U.K., as well as those in transition e.g. Russia that have recently gained entrance in the EU. In this paper I analyze the impact of CBI on inflation, the benefits that are believed to come along with CBI and the factors used in measuring CBI. You will see that CBI can have different forms of measurement that produce slightly different results, hence the effectiveness of the CBI index is also analyzed. The reason for choosing this topic for further study is simply because during the past two decades there has been a considerable move towards central bank independence across several countries, with the belief that this will improve their inflation levels and thus contribute to economic growth. However, as you will see further on, this is not always the case, as some studies have revealed contradicting results, and economists and academics continue their studies to get a clerer picture of this issue. 2. The Spread of CBI and The Reasons for It To begin with, it is amazing how fast CBI has spread among countries and governments since the late 1980s. One simple explanation of this spread is A.Alesinas (1988; 845) statement: independent central banks have been associated with a lower average inflation rate and may have been responsible for reducing politically induced volatility of monetary policy and inflation 2.1 Should a central bank become independent? Folder (2005) explains that CBI was adopted to avoid possible disputes between political parties as a central bank is seen as a provider of information. Many economists have expressed their opinion on the spread of CBI; others have linked it to a way of avoiding the blame of political failure by some governmental parties (Miller, G. 1998, White 1994). Others have linked it to the infrequent changes of the government (de Haan and vant Hag, 1995). That is, central bank independence in many cases was adopted after periods of high inflation in order to reduce it, due to the inflation targeting function a central bank is capable of pursuing. It can also be associated with the attraction of foreign investment and hence economic growth as a consequence of the targets set and the autonomy with which the bank can then operate (Maxfield, 1997). In countries within the European Union, CBI is a perquisite following the Maastricht Treaty (1992) for adopting the euro currency. Overall and according to Folder (2005), independence has always been related to the adoption of anti-inflationary measures for pursuing monetary policy, but its explanation lies within the sociology of the financial elites and the politics legitimizing their policy preferences. The reasons behind achieving price stability through gaining central bank independence, Cukierman (1996) explains are several and include; the breakdown of other institutions like the European Monetary System (EMS) that had been responsible for maintaining price stability which is considered as the single and most significant objective of a central bank. Ilieva and Gregoriou (2005) suggest that in transition economies central bank independence has increased mainly due to the desire of such countries like e.g. Czech Republic, Poland, Romania, etc., to join the European Union and the acquis communautaire that applicant countries should adopt. As they continue to reason the addiction to CBI, they add that another incentive for CBI is the international financial institutions such as the IMF (International Monetary Fund) that require certain criteria to be met before making unconditional loans, and these criteria are feasibly met with the help of CBI. Also, countries are attracted to CBI as this will attract potential investors by improving the nations creditworthiness. Cukierman, A. (1996) analyses developments since the late 1980s to the legal independence of central banks and to its meaning; the measurement of CBI, the interaction of central banks with the government, its effect on the economy, its determinants, etc According to Cukierman, the trend towards CBI is due to a quest for price stability which is due to the following two reasons: First, following the stagflation of the seventies and the adverse economic performance of some high inflation countries, in Latin America and elsewhere, conventional wisdom concerning inflation and real growth has changed. Whereas during the sixties the accepted view was in line with Keynesian dogma, that some inflation is good for growth, during the eighties and nineties became that inflation and the associate uncertainties retard growth. (1996; 3) The good economic performance of Japan and Germany, countries with already low inflation added more value to the above concept. Second, the rapid growth and internationalization of capital markets raised the importance of price stability as governments and private investors sought to enhance their access to broadening world financial markets. (1996; 3) 2.2 Types of Central Bank Independence Independence with regards to central banking can be categorized into different groups, depending on the degree of freedom and the subject from which the central bank becomes independent. The major types of independence are; Legal independence, where the bank is partly accountable to the government and legislation provides a framework within which the central bank and the government cooperate on certain issues. This form of independence varies significantly among countries as it depends on how strong in the law in each country and the degree to which it is followed. However, the degree of legal independence, namely LVAW, as it will be shown below, has been used by many as a major index of measuring the degree of CBI. Goal independence refers to the case where the central bank is allowed to set its own goals, e.g. price stability, money supply, inflation targeting. However in most cases under this type of independence, the bank will decide on its goals with the confirmation of the relevant governmental departments. In this way, goal independence helps avoiding conflicts among fiscal and monetary policies, and increases the level of transparency and credibility of the central bank over its goals. Operational independence is the most common form of independence and is followed by many central banks around the world, for instance, the Bank of England since 1997. It involves the government setting the banks goals e.g. a 2% level of inflation, but the central bank being free to choose the instruments e.g. interest rates, to meet the targets set by the government. Another form of independence is managerial independence, by which the central bank has the power of appointing its own stuff, set its budget, etc. This form is a necessity for the existence of the other abovementioned forms of central bank independence and is therefore granted to all central banks that can call themselves independent. 2.3 The case for central bank independence There is a huge surge towards central bank independence by both the public and the governments, in the belief that independent central banks will not only achieve low inflation rates and price stability, but will subsequently lead to long-term economic growth and development. However CBI is an issue that needs further research before determining whether it should be adopted by all countries. This depends on the economic state of the country, whether it is a developed or a developing country or even on the demand of autonomy by the political parties within the country since by granting independence the government must pass to the bank the responsibilities of e.g. controlling the interest rates, etc. over which it used to have the power. Another issue that needs to be examined before granting independence to a central bank is the political stability and the degree of uncertainty within the country. This is because in times of uncertainty and instabilities, e.g. prior to elections, the public favours CBI as an independent central bank is more objective in its role and always forward looking without ignoring the long-term effects of its decisions. The majority of the parties affected by the actions of an independent central bank, i.e. the government as well as the general public are attracted by CBI because of the greater accountability and transparency the bank is equipped with when adopting a greater degree of autonomy. Moreover, it is expected to bring lower levels of inflation and this is the main reason why people welcome CBI and the number of central banks becoming independent has been increasing over the years. The main reason behind this expectation is because a central bank generally acts in favor of the public and in addition to the fact that it becomes free from the government and any political pressures, it is in a position to avoid short-term temptations regarding low interest rates which the government usually uses prior to electoral periods, for the sake of long-term low inflation and price stability, which in combination with other exogenous factors can result in economic growth. Moreover, when a central bank gains its independence through institutional reform it becomes capable of appointing its own governor thus it moves away from political interference, and can also set an explicit inflation target. Additionally and as Carlstrom, T.C. and Fuerst, S.T. (2006) explain independence helps a central bank in constraining the behavior of fiscal authorities. That is, it can prevent people and especially the government following fiscal policy from acting in their short-term best interests, recognizing that any actions taken in the short-term e.g. lowering the interest rates to attract investments, may become undesirable in the long-term, e.g. rising inflation levels as with higher demand from low interest rates, the prices will likely increase. In this way, CBI also prevents the fiscal authorities from inflating the short-term for delivering e.g. favorable exchange rates. Hence, monetary policy can run in a more credible way and following the targets set, markets w ill know what to expect thus shocks will be limited. However an independent central bank is also likely in extreme cases to bring so low levels of inflation that can be harmful to the economy. According to Epstein, G. (2007), the 3.5% drop in inflation levels by countries adopting an inflation-targeting monetary policy (IMF, 2006) is questionable as to whether this decline will improve economic growth. Explicitly, if the inflation level of a country is already low and the central bank adopts an inflation-targeting monetary policy then the resulting lower inflation level might prove dangerous to the economy by generating economic cycles. Cukierman (1996) has developed two separate approaches for reasoning the urge towards central bank independence and explaining the benefits that can be enjoyed from independence. These include; the theoretical approach according to which in the short-run monetary policy can be conducted in such a way that it allows for some inflation so that it can achieve employment, high economic activity and low interest rates. Hence, policy makers can expect some degree of inflation which they will present in the form of nominal wage and capital market contracts. In this way however, policy makers will have to keep inflation at a level that would balance the real equilibrium if they had been committed to zero-inflation. As a result of this discretionary use of monetary policy, this is subject to inflationary bias, and this bias can only be minimised if monetary policy is delegated to an independent central bank because only this institution is free to choose how to operate monetary policy and takes interest mostly if not only to price stability. And the empirical approach by which the case of CBI lies on empirical evidence showing that countries with an independent central bank have lower inflation rates and higher growth rates per capita output. An example of such a country is New Zealand: 2.3.1 The case of New Zealand New Zealand is a country whose central bank managed to drop the inflation level after being granted with greater independence. The Reserve Bank of New Zealand was granted independence in 1989 following the Reserve Bank of New Zealand Act of 1989 and had therefore established an explicit inflation target. The result was to reduce inflation levels from 7.6% during the years 1955-1988 from when the reserve bank was not independent, down to just 2.7%, after becoming independent, during the period 1989-2000. The latter rate is now considered one of the lowest among industrialized countries. It is obvious that among all OPEC countries, the central bank of New Zealand managed to achieve the lowest inflation rate, especially during the 1990s. What happened during the period of the inflation reduction was that the reserve bank of New Zealand went through a reform that resulted in it being granted with independence and a greater degree of autonomy, leading to low inflation. Specifically, prior to 1989 it used to be an arm of the government. Monetary policy used to be subject to the ministry of finance and therefore the government. As a result, the level of independence was one of the lowest among industrialized countries, while the level of inflation was of the highest. Even then, the relationship between central bank independence was negative, even though the results were the reverse of what is considered optimum, i.e. greater independence, lower inflation. In 1989, the Reserve Bank of New Zealand Act was passed by law. This act codifies inflation targeting and gives more autonomy to the countrys central bank in order to meet its objectives. According to the Act the central banks primary function is: to formulate and implement monetary policy directed to the economic objective of achieving and maintaining stability in the general level of prices. (Reserve Bank of New Zealand Act, 1989 as quoted in Carlstrom T.C. and Fuerst, S.T., 2006, p.3). The impact of the Act on New Zealands economy and specifically the Reserve Banks autonomy can be seen in figure 2 below, which compares the degree of independence across different time periods and among different countries. The findings of the New Zealand case show that if the country had adopted independence earlier then its average inflation rate would be 3.4% rather than 7.6% that it actually used to be, assuming all other things being equal. Following this assumption, CBI itself would be sufficient to reduce worldwide inflation levels from 5.6% down to 3.8%. Despite the considerable drop in New Zealands inflation rate it is still questionable whether this drop was caused solely by CBI, and it is difficult, if not impossible, to quantify by how much the inflation reduction was due to CBI. Firm conclusions cannot be made yet since the data used in this case is of limited sample size and comparisons would therefore be insufficient. What is true is that the relationship between CBI and inflation is similar across time. Any changes to the strength of this relationship are mostly due to macroeconomic and other factors such as the state of the economy, the state of the government, e.g. democracy, etc. and others that will be explained later in this paper. 3. Measuring Central Bank Independence The degree of CBI for each central bank varies according to the state of each country and to compliance with the law. As Cukierman explains, in developing countries where compliance with the law is poor, a suitable proxy for CBI would be the turnover of central bank governors, whereas in industrialised countries such a proxy would be legal independence. Generally, when the appropriate index of independence is used, the results indicate an inverse relationship between CBI and inflation. However, care should be taken not to mistake legal independence with actual independence, as legal independence is necessary but does not guarantee actual independence; legal independence is a necessary, but not a sufficient condition for a truly independent CB. (Cukierman, A., 2001; 7). Exceptions exist, like developed countries, where legal independence seems to be a good proxy because law is highly complied. For a clearer picture of the effectiveness of CBI on the economy, it is preferred that some variables that make up the CBI index are used in combination, or that some indices are used only for a specific purpose. For instance, legal independence is a good proxy for actual independence in developed countries rather than in developing ones. 3.1 The Cukierman Index of CBI The method that will be used the most in this paper to measure the degree of central bank independence and its relationship with inflation will be Cukierman Index (1992), the most widely accepted and used index for this purpose. Initially, the exact definition of the Cukierman Index according to Siklos, P. (1992; 65) is: An indicator of the degree of autonomy enjoyed by several central banks. Cukierman Index to demonstrate graphically the measures of CBI and inflation during two different decades, namely the 1980s and the 1990s: As can be seen in the above graphs during the 1980s even though CBI was not common across countries, there was a negative relationship between CBI and inflation level. This means that the greater the level of independence of a central bank, the lower the level of inflation within the particular country. It is thus obvious that the correlation between CBI and inflation is negative, whereas the errors overall are not fitted closely on the regression line. We should note however that the decade of 1980s was before central banks especially those within industrialized countries underwent major reforms in their statutes which then allowed them a greater degree of autonomy. During the 1990s as Siklos, P. (2002) explains, most central banks went through a reform, as there was a trend towards CBI. As a result the overall degree of CBI increased and all index values were revised upwards, the government granting more autonomy to central banks, in the belief that greater independence would just be adequate for lowering the level of inflation. However, the relationship between CBI and inflation during the 1990s turned out to be the reverse of that of the previous decade. That is, the correlation between CBI-inflation now became weaker but positive since the regression line on the scatter gram in figure 3b has an upward slope, meaning that inflation increases with the degree of independence. It is hard to explain what was wrong with the findings of the 1990s that caused the correlation to be positive, however one might argue that CBI increased for all countries during the 1990s and so it also reflects the inflation performance of the previous decade, although the more independent central banks have delivered lower inflation levels in the 1980s. Furthermore, the Cukierman Index used is believed to contain some inaccuracies concerning the measurements of the degree on independence and thereafter the relationship of that with inflation because it was extended from the 1980s towards the 1990s in a different way than the one initially specified. For this reason more tests will be carried out to explain and compare the effectiveness of measuring CBI using the Cukierman Index in contrast to other indices developed for the same purpose, for instance Alesina and Summers Index. The Cukierman Index will also be used to test the effect of CBI on inflation in transition economies, based on Ilieva and Gregoriou (2005) paper regarding inflation performance, i.e. average inflation and inflation variance, and CBI in transition economies during the period 1991-2003. 3.2 The determinants of the CBI index The degree of independence varies across countries. This is not only due to factors such as the type of independence of each bank, although the most common is operational independence, the degree of law compliance in each country, and tradition, but some other systematic factors as well. Such factors are described and categorized by Cukierman, who presents some hypotheses on these factors: Hypotheses about the determinants of CBI Initially, it is widely accepted that any form of inflationary bias raises the independence of central banks to the degree that politicians wish to grant to the CB. The main idea behind this concept is that the benefits of delegating monetary policy to an independent central bank will be higher when inflation bias is higher in instances of e.g. employment reaction to inflation shocks. This delegation according to Cukierman helps in preventing the competing political party from taking on activities not favoured by the government. Secondly, Cukierman et al (1992, 2001) make the hypothesis that: the wider are the financial markets and the more elastic the supply of funds to government with respect to the interest rate, the more likely is the CB to be independent. (2001; 19). Additionally, Maxfield (1995) supports that political authorities favour CBI where there is need for funds. When this need is high as he explains, the government delegates more authority to the central bank in order to signal the nations creditworthiness. Finally, the cases of countries that have experienced extremely high levels of inflation in the past, like Germany, Austria, and Brazil, show that such countries are more likely to delegate independence to a central bank so that politicians do not interfere with monetary policy. 3.3 The measurement of the CBI Index Due to the widespread concept that the degree of independence of a nations central bank plays a crucial role upon the policy actions and inflation, Cukierman (1992) presents an analysis of the effects of CBI on inflation and provides various indicators of CBI. However, as he explains, the degree of CBI is determined by several factors from legal to cultural some of which are difficult to measure and quantify, therefore the impact of CBI on inflation varies among countries and there is a certain degree of uncertainty about the level of CBI. As a result, the measurement and the creation of an index of CBI have been based on legal independence, as the degree of CBI also depends on the degree of independence granted to the bank by the law. Despite the variations in the degree of CBI, it can be deduced that a low degree of CBI is linked with higher levels of inflation and inflation variability, while the level of credibility of a central bank with a low degree of CBI will be lower. Cukierman presents three different sets of indicators of CBI; a proxy for legal independence and proxies for the deviations of actual from legal independence. Independence measured under these proxies is limited specifically to the Central banks ability to meet a single objective; price stability. The reason for using several proxies in measuring CBI is because each proxy is a noisy indicator that captures a somewhat different aspect of CB independence (Cukierman, 1992; 370), so using a combination of them reduces this noisiness of the overall measure 3.3.1 Measuring and Coding Legal Central Bank Independence Using a proxy of legal independence is vital in making comparisons with previous studies on the impact of CBI on economic issues because all existing attempts on the features of an independent central bank rely on the banks legal independence. Cukierman presents the indices of legal aspects of CBI by separating into four groups the variables which make for a legally independent central bank. These groups are: Chief executive officer: CEO Policy formulation: PF Final Objectives: OBJ Limitations on lending: LLand codes them by the degree of independence of each group for the central bank of each of the countries included in the study. The main assumptions made are; the central banks whose single objective is price stability are considered to be more independent, so are central banks with stricter limitations on lending from the CB. The coding involves sixteen different variables in a scale from 0 (least independence) to 1 (maximum independence), during the time period 1950-1989, separated into four different decades. Due to the narrow definition of each of the variables used and the consequent lack of precision and multicollinearity problems that may arise, these variables are aggregated into eight legal variables by just calculating the unweighted mean of the codings used. Furthermore, it is necessary to have an additional single index of legal independence for each country to assess the aggregate legal independence of the CB. This index can have two alternatives, the LVAU and the LVAW, that are computed by calculating the average of the codings of the first eight variables as described above. Table 1 in Appendix A shows the ranking of the countries according to the legal independence of their central banks as measured by the LVAU during the eighties decade. The LVAW would also give a similar picture. Looking at the table of results one can see that among the seven most highly-ranked countries four are developed (Switzerland, West Germany, Austria and U.S.), while among the seven least-ranked countries four are less developed (Morocco, Panama, Yugoslavia and Poland). Generally, the top 10% of the rankings is comprised of developed countries, whereas the bottom 10% is concentrated with less developed countries. One should also note that there had been no hyperinflation experienced by developed countries during the 1980s, while some of the Latin America countries have, e.g. Brazil and Bolivia with a rate of 230%. This according to Cukierman may suggest that legal CBI may be neither necessary nor sufficient for low inflation. (1992; 382). 3.3.2 The turnover rate of Central Bank governors as a proxy for actual independence As already explained, the legal status of the central bank is just one of the several determinants of actual CBI. There is no clear systematic indicator of actual CBI, but Cukierman (1992) presents two sets of such indicators. One is based on the actual turnover rate of the central banks governor, and the other is based on the answers given to a questionnaire on CBI. Table 2 in Appendix B shows the CB governors turnover rates for the period 1980-1989. It is assumed that the lower the turnover rate the higher the degree of actual independence. Although the results are chronologically old, it is obvious that turnover rates in less developed countries occupy a range that has never been experienced by developed countries. It is indicative that more than half of the less developed countries have a turnover rate higher than the maximum of the rate of developed countries. It is clear that less developed countries experience higher inflation rates, on the grounds of lower actual CBI. On the other hand, low turnover does not necessarily imply a high level of CB independence on the grounds that a relatively subservient governor will tend to stay in office longer than a governor who stands up to the executive branch. (Cukierman, 1992; 385) Critically assessing the results, since the maximum turnover rate for developed countries is 0.2 (.e. five years) suggests that the turnover proxy may not be effective proxies for actual CBI for the sample of developed countries, whereas this proxy can be considered indicative for the sample of developing countries since these have turnover rates exceeding 0.2. 3.3.3 Central Bank Independence from answers to a questionnaire Another aspect of characterizing CBI is the questionnaire. Under this method, answers were obtained from qualified central bankers from twenty-four countries during the period 1980-1989. The main questions asked covered the issues of; legal independence, final monetary policy objectives, monetary policy instruments, actual independence and its divergence from the law and intermediate targets and their indicators. In coding the variables of the questionnaire, the bank is assumed to be more independent, all other things being equal, if the following hold; the term of office of the CB governor is longer than that of the government, limitations exist on lending from the CB which the government is in no position of altering, and in cases where stock targets exist because these mean that the CB is more free to meet its price stability target. Table 3 in Appendix C shows the ranking of central banks by aggregate indices of independence according to questionnaire responses. The aggregate indices of QVAU and QVAW reflect the law and the way it is implemented in practice respectively, as well as important information about actual independence, and are very similar (à ?=0.99). The rankings agree to earlier studies that central banks of developed countries are more independent. However, the median of QVAU for developed countries, that is 0.6 for Britain and Lebanon, is greater than the median for less developed countries, that is 0.49 for Uruguay, and this contradicts the above findings for legal independence using the LVAU. When measuring the degree of CBI it should be taken into account that the measures used above fail to quantify all the aspects of CBI as some are difficult to quantify. Such aspects are the quality of the banks research department and its standing in comparison to other economic research institutions within the public sector (Cukierman, 1992). Independence is generally higher in countries with highly-developed financial markets according to Cukierman because the supervision of financial institutions is under the authority of the CB, so the larger the market the more wide the span of the CBs authority. 4. Central Bank Independence and Inflation Targeting In this section the impact of central bank independence on inflation, inflation variability and the economy overall is analyzed using a model to test whether CBI can actually lower inflation, and comparing the effects of CBI by using both the Cukierman and the Alesina indices of CBI. Additionally, the costs of achieving lower inflation through central bank independence are also explained. MacCallum, B. (1995) believes that it is strong will that is necessary for proper policy behaviour by central banks, not rules and regulations. A policy maker, i.e. a central banker in this case should act immediately to an inflation shock to restore the problem without letting any sp