Does an Independent Central Bank Smooth Exchange Rate Volatility? Evidence from Time-Varying Panel Causality Analysis

Durmuş Çağrı Yıldırım (), Ömer Esen () and Uğur Çınar ()
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Durmuş Çağrı Yıldırım: Tekirdag Namık Kemal University, Department of Economics, Tekirdag, Turkey
Ömer Esen: Tekirdag Namık Kemal University, Department of Public Finance, Tekirdag, Turkey
Uğur Çınar: Tekirdag Namık Kemal University, Department of Economics, Tekirdag, Turkey

Journal of Central Banking Theory and Practice, 2024, vol. 13, issue 3, 219-244

Abstract: This paper empirically examines the effect of the central banks independence on exchange rate volatility by using a large dataset for the E7 (7 emerging countries) covering the period 1998-2017. This paper applies the time-varying panel causality analysis to obtain country-based results. The results show that the policy design, with relatively independent central banks, provides supportive results for macroeconomic stability. It is concluded that policies focusing on current problems by ignoring macroeconomic stability, such as the 2008 crisis, have eliminated the relationship between bank independence and stability.

Keywords: Time-varying panel causality analysis; E7 countries; Central Bank; Monetary Policy Strategy. (search for similar items in EconPapers)
JEL-codes: C33 E58 F31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:13:y:2024:i:3:p:219-244

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