Work

Central bank independence and inflation volatility in developing countries

Year: 2023

Type: article

Abstract: This paper analyzes the effects of legal central bank independence (CBI) on inflation volatility in developing countries. We discuss why CBI should curb inflation volatility, independently from its effect via lowering inflation levels. Empirical analyses in a sample of 96 developing countries between 1980 and 2014 show that CBI is directly and unconditionally associated with lower volatility. The magnitude of this effect is larger in more democratic countries even after accounting for the endogeneity of CBI and inflation. Our results are robust to alternative measurements of the main variables, different model specifications, and methodologies.

Source: Economic Analysis and Policy

DOI: 10.1016/j.eap.2023.05.008

Authors: Ana Carolina Garriga, Cesar M. Rodriguez

Institutions: University of Essex, Portland State University

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $2,250