The Impact of Central Bank Independence on the Performance of Inflation Targeting Regimes

2011 ◽  
Author(s):  
Sami Alpanda ◽  
Adam Honig
Keyword(s):  
Central Bank ◽  
Inflation Targeting ◽  
Central Bank Independence ◽  
The Impact

scholarly journals The external impacts of Central Bank independence

2010 ◽  
Vol 21 (54) ◽  
pp. 51-63 ◽  
Author(s):  
Carroll Howard Griffin
Keyword(s):  
Central Bank ◽  
Financial Crises ◽  
Inflation Targeting ◽  
Standard Procedure ◽  
Developed Countries ◽  
Central Banks ◽  
Central Bank Independence ◽  
The World ◽  
The Impact ◽  
Macroeconomic Environment

The term "central bank independence" (or abbreviated, CBI) can be broadly defined as the degree of freedom of the central bank to pursue monetary policy without interference from political considerations. The idea of central bank independence has been widely accepted over the last several decades by many countries around the world, both developed and developing. Since being first written about academically in the late 1980s, many countries have come to adopt this policy and many governments have come to recognize this as standard procedure. As such, many countries around the world granted autonomy to their central banks during the 1980s and 1990s. The majority of past studies have examined primarily the impact of central bank independence on inflation. however, the additional theoretical benefits are much more far reaching, the result of a more stable and prosperous macroeconomic environment. Additionally, there is only now sufficient data to empirically determine whether many of these claims are true. This study examines central bank independence in developing countries of Latin America and Asia as well as selected developed countries to determine what actual impact an autonomous central bank has had. It also examines such phenomena as financial crises (including the current global crisis of 2008-2009), inflation targeting, legal systems, country development and fiscal policy to determine the effects of these items on not only inflation, but the broad spectrum of macroeconomic outcomes. Although there is some empirical evidence to support the benefits of central bank independence, it is limited in scope to certain areas.

scholarly journals Effectiveness of Central Bank Independence via Its Internal Characteristics

2011 ◽  
Author(s):  
Caroll H. Griffin
Keyword(s):  
Central Bank ◽  
Informal Economy ◽  
Developing Economies ◽  
Developed Countries ◽  
Central Banks ◽  
Central Bank Independence ◽  
Reserve Requirements ◽  
Formal Economy ◽  
The Impact ◽  
Macroeconomic Environment

This study examines central bank independence in developing countries of Latin America and Asia as well as selected developed countries. Many countries around the world, both developed and developing, have accepted the idea of central bank independence over the last several decades, so central banks have autonomy. A majority of studies has examined primarily the impact of central bank independence on inflation as promoting the theoretical benefits of a more stable and prosperous macroeconomic environment. However, there is only now sufficient data to empirically determine whether these claims are true. This research attempts to answer why developing economies with an informal sector resort to inflationary measures to finance their activities; how does a government induce an agent to choose the formal economy. In the trade-off between inflation and reserve requirements, the optimal policy is maximum inflation and minimum reserve requirements as increasing the steady-state utility of an optimizing agent. Also agents prefer the informal economy if policy relies on a maximum reserve requirement.  

scholarly journals Central Bank Credibility, Independence, and Monetary Policy

2018 ◽  
Vol 7 (3) ◽  
pp. 91-110 ◽  
Author(s):  
Abdelkader Aguir
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Emerging Economies ◽  
Inflation Targeting ◽  
Central Bank Independence ◽  
Inflation Target ◽  
Central Bank Credibility

Abstract The main motives behind the adoption of an inflation targeting regime largely relate to the notion of credibility, transparency of monetary policy and the autonomy of the central bank, which explicitly undertakes to achieve a certain inflation target. This paper examines the effects of inflation targeting in emerging economies in relation to the degree of independence of the central bank and the credibility of monetary policy. We find effects in emerging economies with little central bank independence, so our findings suggest that the central bank’s credibility, transparency and independence is a prerequisite for emerging economies to experience a decline in inflation following the adoption of inflation targeting.

Financial globalization and institutions in Africa: the case of foreign direct investment, central bank independence and political institutions

2020 ◽  
Vol 16 (6) ◽  
pp. 931-953
Author(s):  
Abel Mawuko Agoba ◽  
Elikplimi Agbloyor ◽  
Afua Agyapomaa Gyeke-Dako ◽  
Mac-Clara Acquah
Keyword(s):  
Foreign Direct Investment ◽  
Central Bank ◽  
Political Institutions ◽  
Direct Investment ◽  
Central Bank Independence ◽  
Financial Globalization ◽  
Turnover Rates ◽  
Fdi Inflows ◽  
Central Bank Governor ◽  
The Impact

AbstractIn this paper, we examine the bi-directional relationship between financial globalization (proxied by foreign direct investment (FDI) flows) and economic institutions (proxied by central bank independence (CBI)) taking into consideration the role of political institutions. We test our argument on a sample of 48 African countries (1970–2012) using a two-step System Generalized Methods of Moments, with collapsed instruments and Windmeijer robust standard errors. Using two proxies for CBI, the study finds that while legal CBI does not have a significant impact on FDI, high central bank governor turnover rates have a significantly negative impact on FDI inflows. However, higher levels of political institutions significantly enhance the impact of legal CBI on FDI inflows, and dampen the impact of high central bank governor turnover rates on FDI inflows. The study also shows that, higher FDI inflows have a significantly positive impact on both legal and de facto CBI. This impact is accelerated in countries characterized by higher levels of political institutions.

scholarly journals Some Reflections on the Political Economy of Monetary Policy

2020 ◽  
Vol 70 (3) ◽  
pp. 213-228
Author(s):  
Jakob de Haan
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Political Ideology ◽  
Wealth Inequality ◽  
Theoretical Work ◽  
Central Bank Independence ◽  
The Political ◽  
The Government ◽  
Redistributive Effects ◽  
The Impact

AbstractDuring the past decades, central bank independence has been increased in a large number of countries. However, even an independent central bank does not operate in a political vacuum. For instance, governments generally appoint political allies, presuming that consequently the central bank will follow policies that are in line with the governments’ preferences. The first part of this paper reviews recent research on whether the political ideology of the government has any impact on monetary policies pursued. It is argued that if forward-looking data are used to estimate Taylor-rule models for a panel of OECD countries that take country heterogeneity into account, there is no strong evidence for partisan effects on monetary policy. One of the reasons that central bank independence is no longer taken for granted is the acclaimed redistributive effects of monetary policy. The second part of the paper reviews recent research on the impact of conventional and unconventional monetary policy on income and wealth inequality. It is concluded that empirical research provides very mixed evidence on these issues and that it is not well connected to recent theoretical work.

scholarly journals Role of Central Bank Independence in Banking and Financial Stability Ensuring

2020 ◽  
Vol 4 (2) ◽  
pp. 115-121 ◽  
Author(s):  
Victoria Dudchenko
Keyword(s):  
Developing Countries ◽  
Central Bank ◽  
Financial Stability ◽  
Fixed Effects ◽  
Developed Countries ◽  
Central Bank Independence ◽  
Stage Of Development ◽  
Banking Stability ◽  
The Impact

This paper is devoted to defining the role of the central bank in ensuring banking and financial stability. The main purpose of the study is to assess the direction and strength of the impact of central bank independence in terms of its individual aspects on the parameters of banking and financial stability for different groups of countries. Systematization of literature sources and the results of existing empirical research has shown that the expected effects of increasing the independence of the central bank are to improve banking and financial stability. For the study, a sample of statistical data for 10 developed and 10 developing countries for the period 1991-2012 was formed. The methodological basis of the study were the tools of panel regression modeling with fixed effects with Stata software use. The article presents the results of empirical analysis, which showed that the independence of the central bank is an important factor in ensuring banking stability. At the same time, the impact on financial stability has not been conclusively confirmed. The study empirically confirms and theoretically proves that the stage of development of the country determines the strength of such influence. Thus, developed countries generally show closer links between central bank independence and banking and financial stability, which in most cases are directly dependent, while developing countries have less lasting effects. The results of the analysis of the links between certain aspects of central bank independence and the level of banking and financial stability are of great practical value. The results of the study create a scientific basis for substantiating the sequence of actions aimed at strengthening the independence of the central bank. Thus, in developing countries, the focus should be on defining and prioritizing central bank goals, while developed countries should take a deeper approach to this issue and ensure the independence of monetary policy and financial independence of the central bank. Keywords: central bank, independence, banking stability, financial stability, Z-score, non-performing loans, capitalization, developed countries, developing countries, panel data.

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