Does central bank independence lower inflation?

This paper provides a potential explanation for the recent findings of no significant relationship between central bank independence (CBI) and lower inflation. We argue that although CBI delivers lower inflation in the short-term, it may reduce the scope for productivity enhancing public investment...

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Bibliographic Details
Published inEconomics letters Vol. 84; no. 3; pp. 305 - 309
Main Authors Ismihan, Mustafa, Gulcin Ozkan, F.
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.09.2004
Subjects
Central bank independence
Inflation
Public investment
E62
E58
Central bank independence
Public investment
Inflation
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Summary:This paper provides a potential explanation for the recent findings of no significant relationship between central bank independence (CBI) and lower inflation. We argue that although CBI delivers lower inflation in the short-term, it may reduce the scope for productivity enhancing public investment and so harm future growth potential. We also argue that the effects on growth make CBI less likely to achieve lower inflation in the long-term.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2003.12.022