The impact of central bank’s independence on macroeconomic indicators

Abstract

The article reveals the relationship between the Central Banks’ Independence (CBI) and macroeconomic indicators for post-Soviet and developed countries. Many publications are devoted to the problem of the influence of CBI on inflation. Still, its influence on other macroeconomic indicators has not been sufficiently studied, especially for post-Soviet countries. This article presents the results of testing the hypothesis about the presence and direction of influence of CBI on macroeconomic indicators: economic growth, exports, imports, and income inequality. The study used panel data analysis with fixed effects on twenty years of data starting from 2001. According to the results, an increase in CBI, evaluated by two well-known indices, contributes to a decline in economic growth rates, a decrease in exports and imports, and a decrease in income inequality in post-Soviet countries but does not significantly impact developed countries. At the same time, a statistically significant impact of some sub-indices of these indices on them was revealed in both post-Soviet and developed countries. The results of this study reflect the importance of central bank independence, especially in post-Soviet countries, in achieving economic development goals.

Key words: central bank independence, economic growth, exports, imports, inequality, post-Soviet countries, developed countries.