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Long run inflation: persistence and central bank independence

Author

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  • Angelos Athanasopoulos
  • Donato Masciandaro
  • Davide Romelli

Abstract

This paper provides novel evidence of the long-run effects of central bank independence on inflation. We show that improvements in central bank independence have a much larger impact on inflation in the long run compared to the short run. Contrary to most of the previous literature, our results also show that the long-run effects of central bank independence on inflation are larger in developing countries. We find similar effects using linear and instrumental variable local projection methods. Finally, we show that central bank independence also reduces inflation persistence, reinforcing the effectiveness of monetary policy.

Suggested Citation

  • Angelos Athanasopoulos & Donato Masciandaro & Davide Romelli, 2025. "Long run inflation: persistence and central bank independence," BAFFI CAREFIN Working Papers 25237, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:baf:cbafwp:cbafwp25237
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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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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