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Does Central Bank Independence Affect Inflation?

Author

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  • Vera Gojčaj

    (Central Bank of Montenegro, Podgorica, Montenegro)

Abstract

The objective of this paper is to analyze the impact of central bank independence on inflation in Western Balkan countries, from 2010q1 to 2022q4. In this paper the panel Autoregressive Distributed Lags (ARDL) model for six Western Balkan countries is used to analyse the effects of central bank independence on inflation. Results show that central bank independence has a negative effect on inflation in countries studied. These findings help management of banks and policymakers to find other monetary tools to reduce inflation and develop more effective regulations. The paper recommends central banks to use central bank independence to fight inflation.

Suggested Citation

  • Vera Gojčaj, 2025. "Does Central Bank Independence Affect Inflation?," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 14(3), pages 161-183.
    • Handle: RePEc:cbk:journl:v:14:y:2025:i:3:p:161-183
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • 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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