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Central bank independence, income inequality and poverty: What do the data say?

Author

Listed:
  • Jan-Egbert Sturm

    (KOF Swiss Economic Institute, ETH Zurich
    CESifo)

  • Cristina Bodea

    (Michigan State University)

  • Jakob de Haan

    (CESifo
    University of Groningen)

  • Raymond Hicks

    (Columbia University)

Abstract

This paper examines whether the independence of central banks is related to income inequality and poverty. Following the 2008 financial crisis, independent central banks have been criticized that their actions contribute to an unequal income distribution. Yet, the case can also be made that such independence is orthogonal to income inequality or can even help mitigate it. As proxies for inequality, we employ five-year averages of the Gini coefficient and the poverty gap. Our database consists of a large set of countries, covering a long period. Our fixed effects panel estimates suggest that—despite many claims to the contrary—there is neither a robust relationship between central bank independence and the Gini coefficient nor between independence and the poverty gap. Several robustness checks (using alternative proxies for income inequality and central bank independence, interaction effects, quantile and cross-section regressions) confirm our finding.

Suggested Citation

  • Jan-Egbert Sturm & Cristina Bodea & Jakob de Haan & Raymond Hicks, 2025. "Central bank independence, income inequality and poverty: What do the data say?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 23(1), pages 227-246, March.
    • Handle: RePEc:spr:joecin:v:23:y:2025:i:1:d:10.1007_s10888-024-09637-6
    DOI: 10.1007/s10888-024-09637-6
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    More about this item

    Keywords

    Income inequality; Poverty gap; Central bank independence;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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