Central bank independence and its effect on money market stability

Since 1990s many countries have moved toward greater central bank independence (CBI) by either amending their Central Bank’s laws or writing them de novo. Also countries of Western Balkans and many other transition countries have moved toward greater CBI. There are many potential benefits associated with greater CBI, and one of them is stable growth of money and liquidity. For a given level of money market development the hypothesis is that a more independent CB is likely to promote more stable growth of money supply (Dželetović et al., 2008). As a result the main research task of this work is to estimate the effects of CBI on money market growth for five Western Balkans countries and five other European transition countries. Because the empirical studies were very limited for the relationship between CBI and money market growth, there were no clear conclusions. In addition, there were different measuring methodologies that attempt to quantify the extent of legal and actual CBI. Related to the main research task, this dissertation has examined the effects of CBI on money market stability (proxied by bank deposit growth) for a sample of 10 countries for a period from 1999-2009 by using fixed effect model. Through this methodology different regressions have been estimated, but the results were not robust and there are no clear finding on the relationship between CBI and money market growth.

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A historical analysis of central bank independence in Latin America: the Colombian experience, 1923-2008

Revista de Historia Económica / Journal of Iberian and Latin American Economic History ◽

10.1017/s0212610909990061 ◽

2010 ◽

Vol 28 (1) ◽

pp. 83-102 ◽

Cited By ~ 1

Author(s):

Adolfo Meisel ◽

Juan D. Barón

Keyword(s):

Latin America ◽

Central Bank ◽

Historical Analysis ◽

Central Bank Independence ◽

Price Stability ◽

Monetary Policies ◽

The Relationship

AbstractThis paper explores the relationship between central bank independence and inflation in Latin America, using the experience of Colombia (1923-2008) as a case study. Since its creation, in 1923, Colombia’s central bank has undergone several reforms that have changed its objectives and degree of independence. Between 1923 and 1951, it was private and independent, with a legal commitment to price stability. In 1962, monetary responsibilities were divided between a government-dominated monetary board, in charge of monetary policies, and the central bank, which carried them out. In the early 1990s, the bank recovered its independence and its focus on price stability. Inflation varied substantially during these subperiods. Our analysis suggests that the central bank independence, combined with a commitment to price stability, renders the best results in terms of price stability.

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Central Bank Independence – The Case of the Central Bank of Montenegro

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2018-0021 ◽

2018 ◽

Vol 7 (3) ◽

pp. 25-40

Author(s):

Milivoje Radovic ◽

Milena Radonjic ◽

Jovan Djuraskovic

Keyword(s):

Economic Theory ◽

Central Bank ◽

Inflation Rate ◽

Central Banks ◽

Transition Countries ◽

Central Bank Independence ◽

Executive Power ◽

Eu Accession ◽

Key Factor ◽

The Eu

Abstract In recent decades, there has been a trend in increasing the level of independence of central banks. The key factor that has contributed to a growing interest in this concept is grounded in economic theory that confirms the link between a lower inflation rate and a greater level of central bank independence. For this reason, in many countries, the existing regulations relating to central bank have been modified to protect its position from the absolute influence of the executive power of the state. This trend was particularly prevalent in transition countries, which was conditioned primarily by the EU accession criteria. The aim of this paper is to analyse independence of the Central Bank of Montenegro through the prism of functional, institutional, financial, and personal independence, and to assess the level of its legal independence by using appropriate indices.

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The Effect of Central Bank Independence on Price Stability: The Case of Indonesia

Buletin Ekonomi Moneter dan Perbankan ◽

10.21098/bemp.v15i4.431 ◽

2013 ◽

Vol 15 (4) ◽

pp. 353-376

Author(s):

Yessy Andriani ◽

Prof. Prasanna Gai

Keyword(s):

Central Bank ◽

Error Correction ◽

Central Bank Independence ◽

Least Square ◽

Price Stability ◽

Inflation Target ◽

Partial Adjustment ◽

Correction Model ◽

Ordinary Least Square ◽

The Relationship

This paper investigates the relationship between central bank independence (CBI) and inflation in Indonesia during 1970-2006. Using partial adjustment Ordinary Least Square (OLS) and Engel Granger Error Correction Model, the result shows that legal CBI index inversely affect the inflation, while the turnover of governor is not significant. This result emphasizes Bank Indonesia to strengthen its independency in order to achieve his inflation target. Keywords: Central bank independency, Inflation, Error Correction Model.JEL Classification : C32, E58

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The efficiency of public expenditure and economic growth in the countries of the Western Balkans

Ekonomski signali ◽

10.5937/ekonsig2101081p ◽

2021 ◽

Vol 16 (1) ◽

pp. 81-93

Author(s):

Ljiljana Prole ◽

Dragana Petković

Keyword(s):

Economic Growth ◽

Public Expenditure ◽

World Economic Forum ◽

Western Balkans ◽

Main Research ◽

The World Bank ◽

The World ◽

World Economic ◽

The Relationship ◽

The International Monetary Fund

The countries of the Western Balkans are facing a number of challenges. One of the most acute ones, certainly, is improving the efficiency of public expenditure. Having this in mind, the main research objective of the paper is to present the interdependence between public expenditure and economic growth in the Western Balkans. In addition, the analysis is focused on the efficiency of public expenditure in the group of the above-stated countries, as well as the relationship between the size of public expenditure and its efficiency in these countries. Data from the International Monetary Fund, the World Bank and the World Economic Forum were used for the analysis. The results reveal that this interdependence in the countries of the Western Balkans, in addition to different intensity, has a different direction.

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Measuring Central Bank Independence in Selected Transition Countries and the Disinflation Process

SSRN Electronic Journal ◽

10.2139/ssrn.1016043 ◽

2000 ◽

Cited By ~ 9

Author(s):

Sandra Dvorsky

Keyword(s):

Central Bank ◽

Transition Countries ◽

Central Bank Independence

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Causality Relationship between Central Bank Reforms and Inflation: Evidence from Developing Countries

Signifikan Jurnal Ilmu Ekonomi ◽

10.15408/sjie.v9i1.10955 ◽

2020 ◽

Vol 9 (1) ◽

pp. 15-30

Author(s):

Cep Jandi Anwar ◽

Okot Nicholas

Keyword(s):

Developing Countries ◽

Central Bank ◽

Structural Break ◽

Central Bank Independence ◽

Inflation Stabilization ◽

Causality Tests ◽

Causality Relationship ◽

Structural Break Test ◽

The Relationship ◽

Positive Effect

This study provides evidence on the relationship between central bank reforms and inflation dynamics in a sample of 37 developing countries. We use panel structural break test and Granger non‐causality tests on annual inflation and the legal index of central bank independence (CBI), as a proxy of central bank reform, over 40 years period. The empirical results indicate a positive effect of central bank independence on inflation stabilization. Besides, we find that there exists bi-directional causality between central bank reforms and inflation. These findings suggest that central bank independence is beneficial in terms of sustained macroeconomic stabilization and should harness among developing countries. In particular, reforms should design to give central banks more autonomy in the conduct of monetary policy and financial sector regulation. JEL Classifications: E31, E58How to Cite:Anwar, C. J., & Nicholas, O. (2020). Causality Relationship Between Central Bank Reforms and Inflation: Evidence from Developing Countries. Signifikan: Jurnal Ilmu Ekonomi, Vol. 9(1), 15-30. doi: http://dx.doi.org/10.15408/sjie.v9i1.10955.

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The effect of negative policy rates on the interest-rate pass-through mechanism in the eurozone

Review of Keynesian Economics ◽

10.4337/roke.2019.02.09 ◽

2019 ◽

Vol 7 (2) ◽

pp. 247-262 ◽

Cited By ~ 2

Author(s):

Yannis Panagopoulos ◽

Ekaterini Tsouma

Keyword(s):

Interest Rate ◽

Central Bank ◽

Interest Rates ◽

Money Market ◽

Negative Interest Rates ◽

Time Period ◽

Pass Through ◽

The Interest Rate ◽

The Impact ◽

The Relationship

This paper examines the impact of the June 2014 switch to negative interest rates (NIRs) by the European Central Bank (ECB) on the operation of the eurozone interest-rate pass-through (IRPT) mechanism. We focus on the relationship between major central-bank policy rates and selected money-market rates. That link is identified as the first stage of the IRPT mechanism and its dynamics are analysed using Granger causality and cointegration techniques for the time period January 2000–June 2017. Our empirical findings indicate a feedback relationship between the ECB policy and the money-market rates in the period prior to June 2014, but that relationship is non-operative when considering only the period of NIRs.

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Politische und Institutionelle Determinanten der Staatsverschuldung

Zeitschrift für Wirtschaftspolitik ◽

10.1515/zfwp-1998-0206 ◽

1998 ◽

Vol 47 (2) ◽

Cited By ~ 4

Author(s):

Uwe Wagschal

Keyword(s):

Central Bank ◽

Public Debt ◽

Direct Democracy ◽

Research Question ◽

Central Bank Independence ◽

Institutional Factors ◽

Financial Policy ◽

Main Research ◽

Capacity To Act

AbstractDeterminants of public debt and deficits are nowadays considered as central issues of economic and financial policy. Concerning a decreasing capacity to act due to financial restrictions the consequences for governments can be serious. The main research question is: which political and institutional factors are responsible for increasing debt and deficits and which factors rather tend to confine them. Starting with a discussion of theories related to public debt, the paper than examines possible determinants. The focus is on certain institutions such as elections, strong governments, central bank independence or direct democracy. Furthermore, the role of parties and the complexion of governments is analysed. In the centre of interest are western industrialised nations, which are members of the OECD.

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Central Bank Independence and Inflation: The Matters of Financial Development and Institutional Quality

Signifikan Jurnal Ilmu Ekonomi ◽

10.15408/sjie.v9i1.12899 ◽

2020 ◽

Vol 9 (1) ◽

pp. 1-14

Author(s):

Agung Kunaedi ◽

Darwanto Darwanto

Keyword(s):

Central Bank ◽

Financial Development ◽

Inverse Relationship ◽

Institutional Quality ◽

Financial Sector ◽

Central Bank Independence ◽

Institutional Diversity ◽

Dynamic Panel ◽

The Relationship

The inverse relationship between the independence of the central bank (CBI) and inflation became a consensus that trusted throughout the world. However, there is no conclusive explanation of why and how central bank independence has succeeded in suppressing inflation. The purpose of this study is to examine the influence of financial development and institutional quality on the relationship between central bank independence and inflation. Using 20 Countries of Asia with institutional diversity, this study analyzed through a dynamic panel approach (GMM-Arellano and Bond Estimator). The result indicates that the inverse relationship between central bank independence and inflation depends on the development of the financial sector and also the institutional quality of each country. In other words, to make the central bank's independence work effectively in order to solve bias inflation, the improvement of the financial sector and also the institutional quality is needed.JEL Classification : E580, E310, E020 How to Cite:Kunaedi, A., & Darwanto. (2020). Central Bank Independence and Inflation: The Matters of Financial Development and Institutional Quality. Signifikan: Jurnal Ilmu Ekonomi, Vol. 9(1), 1-14. doi: http://dx.doi.org/10.15408/sjie.v9i1.12899.

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