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Does Central Bank Independence Really Matter? Re-Assessing the Role of the Independence of Monetary Policymakers in Macroeconomic Outcomes

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  • Athina Zervoyianni

    (Department of Economics, University of Patras, Greece)

  • Athanasios Anastasiou

    (Department of Economics, University of Patras, Greece)

  • Andreas Anastasiou

    (Research Department, Barclays Bank, London, UK)

Abstract

Using both standard regressions and Markov-Chain Monte-Carlo estimation methods from a Bayesian perspective and a sample of 39 countries for 1981-2006, we re-examine the role of central-bank independence (CBI) in macroeconomic outcomes. Control variables commonly used in the literature are examined together with a number of other variables to which existing studies often give little attention. Our results suggest that lower inflation should be seen as resulting from a broad-range of institutional and structural factors, with CBI failing to play the key role. We also find that central-bank independence has no favourable effect on employment growth, while it increases output volatility following supply-side shocks.

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  • Athina Zervoyianni & Athanasios Anastasiou & Andreas Anastasiou, 2013. "Does Central Bank Independence Really Matter? Re-Assessing the Role of the Independence of Monetary Policymakers in Macroeconomic Outcomes," Working Paper series 03_13, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:03_13
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    Cited by:

    1. Goulas, Eleftherios & Zervoyianni, Athina, 2018. "Active labour-market policies and output growth: Is there a causal relationship?," Economic Modelling, Elsevier, vol. 73(C), pages 1-14.
    2. Ciuca, Vasilica & Pasnicu, Daniela & Son, Liana & Sipos, Ciprian & Iordan, Marioara, 2009. "The Romanian Flexicurity – A Response to the European Labour Market Needs," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(2), pages 161-183, June.
    3. Geeta Garg, 2015. "Impact of trilemma indicators on macroeconomic policy: Does central bank independence matter?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-019, Indira Gandhi Institute of Development Research, Mumbai, India.
    4. Montserrat Ferré & Carolina Manzano, 2020. "Independent Central Banks: Low Inflation at No Cost? A Model with Fiscal Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 16(6), pages 233-286, December.

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    More about this item

    Keywords

    Macroeconomic performance; central-bank independence; globalization & labour markets; Bayesian methods;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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