IDEAS home Printed from https://ideas.repec.org/p/rim/rimwps/11_14.html
   My bibliography  Save this paper

The Effects of Central Bank Independence and Inflation Targeting on Macroeconomic Performance: Evidence from Natural Experiments

Author

Listed:
  • Michael Parkin

    (University of Western Ontario, Canada)

Abstract

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.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Michael Parkin, 2014. "The Effects of Central Bank Independence and Inflation Targeting on Macroeconomic Performance: Evidence from Natural Experiments," Working Paper series 11_14, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:11_14
    as

    Download full text from publisher

    File URL: http://www.rcea.org/RePEc/pdf/wp11_14.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Charles T Carlstrom & Timothy S Fuerst, 2009. "Central Bank Independence And Inflation: A Note," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 182-186, January.
    2. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, April.
    3. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-162, May.
    4. Jeroen Klomp & Jakob De Haan, 2010. "Inflation And Central Bank Independence: A Meta‐Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 593-621, September.
    5. Michael Parkin, 2013. "Central Bank Laws and Monetary Policy Outcomes: A Three Decade Perspective," University of Western Ontario, Economic Policy Research Institute Working Papers 20131, University of Western Ontario, Economic Policy Research Institute.
    6. Michael Parkin & Robin Bade, 1978. "Central Bank Laws and Monetary Policies: A Preliminary Investigation," University of Western Ontario, Departmental Research Report Series 7804, University of Western Ontario, Department of Economics.
    7. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Petrevski, Goran, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," EconStor Preprints 271122, ZBW - Leibniz Information Centre for Economics.
    2. David Vavra, 2015. "Inflation Targeting Experience: Lessons for Ukraine," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 233, pages 39-53.
    3. Günes Kamber & Özer Karagedikli & Christie Smith, 2015. "Applying an Inflation-Targeting Lens to Macroprodential Policy "Institutions"," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 395-429, September.
    4. Hermann Sintim-Aboagye & Chandana Chakraborty & Serapio Byekwaso, 2017. "Foreign Capital Flows, Uncertainties of Exchange Rates and Central Bank Independence: Implications for Emerging Economies," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(4), pages 485-496, December.
    5. Libich, Jan & Nguyen, Dat Thanh & Stehlík, Petr, 2015. "Monetary exit and fiscal spillovers," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 184-206.
    6. Kurmaş Akdoğan, 2015. "Asymmetric Behaviour of Inflation around the Target in Inflation-Targeting Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(5), pages 486-504, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Parkin, 2013. "Central Bank Laws and Monetary Policy Outcomes: A Three Decade Perspective," University of Western Ontario, Economic Policy Research Institute Working Papers 20131, University of Western Ontario, Economic Policy Research Institute.
    2. Hielscher, Kai & Markwardt, Gunther, 2012. "The role of political institutions for the effectiveness of central bank independence," European Journal of Political Economy, Elsevier, vol. 28(3), pages 286-301.
    3. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Ichiro Iwasaki & Akira Uegaki, 2017. "Central Bank Independence and Inflation in Transition Economies: A Comparative Meta-Analysis with Developed and Developing Economies," Eastern European Economics, Taylor & Francis Journals, vol. 55(3), pages 197-235, May.
    5. Mark Mietzner & Dirk Schiereck, 2011. "Staatsfonds als Ankerinvestoren: Eine Note zum Einstieg von Aabar bei Daimler," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 12(1), pages 92-100, February.
    6. Ftiti, Zied & Aguir, Abdelkader & Smida, Mounir, 2017. "Time-inconsistency and expansionary business cycle theories: What does matter for the central bank independence–inflation relationship?," Economic Modelling, Elsevier, vol. 67(C), pages 215-227.
    7. Jamus Jerome Lim, 2021. "The limits of central bank independence for inflation performance," Public Choice, Springer, vol. 186(3), pages 309-335, March.
    8. Donato Masciandaro, 2018. "Central Banks And Macroprudential Policies: Economics And Politics," BAFFI CAREFIN Working Papers 1878, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    9. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.
    10. Carola Conces Binder, 2021. "Political Pressure on Central Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(4), pages 715-744, June.
    11. David S. Miller, 2019. "Optimal Structure of Fiscal and Monetary Authorities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(2-3), pages 289-312, March.
    12. Taniya Ghosh & Yadavindu Ajit, 2023. "Central bank transparency, the role of institutions and inflation persistence," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2023-012, Indira Gandhi Institute of Development Research, Mumbai, India.
    13. Davide Romelli, 2022. "The political economy of reforms in Central Bank design: evidence from a new dataset," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(112), pages 641-688.
    14. Michael Berlemann & Kai Hielscher, 2016. "Measuring Effective Monetary Policy Conservatism of Central Banks: A Dynamic Approach," Annals of Economics and Finance, Society for AEF, vol. 17(1), pages 105-132, May.
    15. Strong, Christine Olivia, 2021. "Political influence, central bank independence and inflation in Africa: A comparative analysis," European Journal of Political Economy, Elsevier, vol. 69(C).
    16. Cep Jandi Anwar, 2023. "Heterogeneity Effect of Central Bank Independence on Inflation in Developing Countries," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(1), pages 38-52, January.
    17. Günes Kamber & Özer Karagedikli & Christie Smith, 2015. "Applying an Inflation-Targeting Lens to Macroprodential Policy "Institutions"," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 395-429, September.
    18. Luis Felipe Céspedes & Rodrigo Valdés, 2006. "Autonomía de Bancos Centrales: La Experiencia Chilena," Working Papers Central Bank of Chile 358, Central Bank of Chile.
    19. Donato Masciandaro & Davide Romelli, 2018. "Beyond the Central Bank Independence Veil: New Evidence," BAFFI CAREFIN Working Papers 1871, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    20. Davide Romelli, 2024. "Trends in central bank independence: a de-jure perspective," BAFFI CAREFIN Working Papers 24217, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

    More about this item

    JEL classification:

    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rim:rimwps:11_14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marco Savioli (email available below). General contact details of provider: https://edirc.repec.org/data/rcfeait.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.