Does central bank transparency converge across the world? Evidence from a club convergence perspective

• Published in: Finance research letters Vol. 66; p. 105732
• Main Authors: Sethi, Dinabandhu, Sharma, Ujjwal, Meher, Alekha
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.08.2024
• Subjects: Central bank transparency; Club convergence; Monetary policy; Panel data model; C33; E52; C87; Monetary policy; E58; Club convergence; Central bank transparency; Panel data model
• ISSN: 1544-6123; 1544-6131
• DOI: 10.1016/j.frl.2024.105732

•The paper examines the convergence of central bank transparency across the globe using the Phillips and Sul panel club convergence technique.•We find 112 countries following four different transition paths in convergence.•We observed that middle-income countries are catching up with high-income ones in central bank transparency.•Countries with inflation and monetary targeting catch up to developed nations in central bank transparency.•Also found countries with high financial depth, trade openness, central bank independence, government effectiveness, and inflation drive convergence to club 1. We study whether there is any evidence of convergence of central bank transparency in 112 countries from 1998 to 2019 using Phillips and Sul panel club convergence technique. The results don't find evidence of a single club convergence of central bank transparency. Instead, our result reveals four clubs converging to their unique transition path. Further, we found that countries with high financial depth, trade openness, central bank independence, effective government, and inflation increase the likelihood of convergence to a higher club 1. Our findings have policy implications for central bankers and developing economies struggling with low transparency.