Central Bank Independence, Economic Growth and Inflation: Theories and Empirical Validations

Adel Bogari ()

International Journal of Applied Economics, Finance and Accounting, 2020, vol. 6, issue 1, 11-21

Abstract: Economics theory’s assumption is that a central bank's independence from political power entails a split between political and monetary power. Such a split is unavoidable in order to control price instability without harming other macroeconomic variables such as growth or unemployment. The theory calling for central bank autonomy, started as early as the 1970s and still gaining ground, assumes the role of central banks as an arrangement sin qua non for tying the hands of government and consequently reducing inflationary bias, or even eliminating this scourge. Moreover, such a debate is mostly relevant for monetary policy, because of its inherent incredibility. Then, our aim in this study is to test the relevance of an anti-inflationary policy, reflected in freeing the central bank from the grip of political power, to combat inflation. To this end, we examine samples of developed countries (20 countries) and developing countries (37 countries) observed over the two study periods 1997-2006 and 2007-2016. We found that high-inflation countries and atypical countries biased our results, for both inflation rates and variability. This finding remains valid even after the introduction of a set of political and economic variables likely to affect inflation.

Keywords: Central Bank; Independence; Economic growth; Inflation; Monetary policy; Political power. (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://onlineacademicpress.com/index.php/IJAEFA/article/view/214/180 (application/pdf)
https://onlineacademicpress.com/index.php/IJAEFA/article/view/214/455 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oap:ijaefa:v:6:y:2020:i:1:p:11-21:id:214

Access Statistics for this article

More articles in International Journal of Applied Economics, Finance and Accounting from Online Academic Press
Bibliographic data for series maintained by Heather Rothman ().