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Central Bank Independence and the Dynamics of Public Debt?

Author

Listed:
  • Stephanos Papadamou
  • Moïse Sidiropoulos
  • Eleftherios Spyromitros

Abstract

Inspired from a simple theoretical macroeconomic model, proposed by Ozkan et al. (2010), which shows a positive link between public debt issues and central bank independence, we empirically investigate if central bank independence affects the way that net stock of government securities and public debt are altered by important macroeconomic variables. Our research has been focused on various levels of independence of the central bank of 22 countries from 1992 to 2000, where significant changes in the index of independence for a large number of central banks have been occurred. By applying dynamic panel data analysis, we show that central bank independence has a significant impact on the effects of deficit, GDP growth and government bonds yield on government bond issues and public debt. The latter result implies that higher levels of central bank independence make countries more affected by market conditions.

Suggested Citation

  • Stephanos Papadamou & Moïse Sidiropoulos & Eleftherios Spyromitros, 2016. "Central Bank Independence and the Dynamics of Public Debt?," Working Papers of BETA 2016-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2016-15
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    File URL: http://beta.u-strasbg.fr/WP/2016/2016-15.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Central bank independence; public debt; panel data.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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