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The long‐run disinflationary effects of central bank independence

Author

Listed:
  • Angelos Athanasopoulos

    (Central Bank of Ireland)

  • Donato Masciandaro

    (Bocconi University)

  • Davide Romelli

    (Trinity College Dublin)

Abstract

This paper provides novel evidence of the long‐run effects of reforms in central bank independence on inflation. Using instrumental‐variable local projections, 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, we also find that these long‐run effects are larger in developing countries. Our results are robust to alternative local projection designs, including doubly robust and difference‐in‐differences specifications. Finally, we provide evidence that reforms that strengthen central bank independence also reduce inflation persistence, reinforcing the effectiveness of monetary policy.

Suggested Citation

  • Angelos Athanasopoulos & Donato Masciandaro & Davide Romelli, 2026. "The long‐run disinflationary effects of central bank independence," Trinity Economics Papers tep2026, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep2026
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    File URL: https://www.tcd.ie/Economics/TEP/2026/TEP2026.pdf
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    Keywords

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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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