Central Bank Independence and Macroeconomic Stability: A Cross-Country Empirical Analysis of Inflation Control, Output Volatility, and Monetary Policy Effectiveness
DOI:
https://doi.org/10.47067/ramss.v9i1.624Keywords:
Central Bank Independence, Inflation Control, Output Volatility, Monetary Policy Effectiveness, Macroeconomic Stability, Ardl, Panel Regression, Institutional AutonomyAbstract
This study examines the role of central bank independence in promoting macroeconomic stability across countries, focusing on its effects on inflation control, output volatility, and monetary policy effectiveness. Using secondary data from 30 countries over a specified period, the study employs quantitative methods, including panel regression and ARDL models, to analyze the short-run and long-run relationships between central bank autonomy and key macroeconomic indicators. The findings suggest that increased central bank independence greatly lowers inflation and output variability and improves the efficiency of monetary policy which verifies the significance of institutional credibility and independence to attain the target economic results. The results also imply that the influence of the central bank independence is increased by the presence of strong economic fundamentals, including the GDP growth and financial development. The findings are relevant to policymakers who want to enhance macroeconomic performance with institutional reforms and suggest the need to have complementary frameworks, which will facilitate effective monetary policy implementation.
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