The Effects of Central Bank Independence and Inflation Targeting on Macroeconomic Performance: Evidence from Natural Experiments
I investigate the effects of central bank independence and inflation targeting on macroeconomic performance in 26 advanced economies during the period 1980 to 2011. I find that both improve macroeconomic performance but inflation targeting is the more effective arrangement. When a central bank becomes more independent, it lowers the inflation rate and the variability of inflation but has no effect on real GDP or unemployment. When a central bank becomes an inflation targeter, it lowers the inflation rate, the variability of inflation, the variability of real GDP growth and the output gap, and has no effect on unemployment.
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|Date of creation:||2013|
|Contact details of provider:|| Postal: Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2|
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- Charles T Carlstrom & Timothy S Fuerst, 2009.
"Central Bank Independence And Inflation: A Note,"
Western Economic Association International, vol. 47(1), pages 182-186, January.
- Charles T. Carlstrom & Timothy S. Fuerst, 2006. "Central bank independence and inflation: a note," Working Paper 0621, Federal Reserve Bank of Cleveland.
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