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A Revisit of the Relation between Central Bank Independence and Inflation

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  • Lin, Hsin-Yi

Abstract

Conventional wisdom argues that the relation between central bank independence (CBI) and inflation is negative. However, empirical studies based upon regressing inflation rates on CBI tend to reject this hypothesis and show that there is no negative relationship. This article investigates the effect of CBI on inflation by quantile regression. The empirical result shows that the relation could be negative or positive for different quantiles of inflation. Quantile regression provides a method for investigating the relation completely between CBI and inflation.

Suggested Citation

  • Lin, Hsin-Yi, 2009. "A Revisit of the Relation between Central Bank Independence and Inflation," MPRA Paper 30398, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:30398
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    References listed on IDEAS

    as
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    4. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    5. Temple, Jonathan, 1998. "Central bank independence and inflation: good news and bad news," Economics Letters, Elsevier, vol. 61(2), pages 215-219, November.
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    7. Cukierman Alex, 1992. "CENTRAL BANK STRATEGY, CREDIBILITY, AND INDEPENDANCE: THEORY AND EVIDENCE: Compte Rendu par Dominique Cariofillo," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 581-590, December.
    8. Brumm, Harold J, 2000. "Inflation and Central Bank Independence: Conventional Wisdom Redux," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 807-819, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Central Bank Independence; Inflation; Quantile Regression.;
    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

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