Meta-Analysis of the Effect of Central Bank Independence on Inflation

Nourahmadi, Mohammad Javad; Khademalizadeh, Amir; Shirmehenji, Mohammad Bagher

doi:10.22054/ijer.2021.56719.918

Document Type : Research Paper

Authors

¹ Assistant Professor, Economics, Allameh Tabataba`i University, Tehran, Iran

² Associate Professor, Economics, Allameh Tabataba`i University, Tehran, Iran

³ M.Sc. Student, Economics, Allameh Tabataba'i University, Tehran, Iran

https://doi.org/10.22054/ijer.2021.56719.918

Abstract

Studies conducted on the relationship between central bank independence and inflation show heterogeneity in the results. Some of these studies have concluded a negative relationship, while others have concluded a positive or insignificant relationship between central bank independence and inflation. The purpose of this study is to conduct a multilevel meta-analysis to examine the effect of central bank independence on inflation. For this purpose, all full-text articles that examined the relationship between central bank independence and inflation were reviewed. After reviewing the content and results, 58 studies were selected to enter the meta-analysis based on the meta-analysis protocol. Data from 58 selected studies included 619 regressions and 913 coefficients that were extracted and coded. In the first level of meta-analysis, the regression coefficients of each study were combined and the effect size of each study was calculated. In the second level of meta-analysis, to calculate the total effect size, the effect size of 58 studies was determined according to the weight of each study. The result of the combination and conclusion of individual studies shows that the independence of the central bank has a small negative and significant effect on inflation. The results also showed that the type of index used to calculate the degree of central bank independence affects the relationship under meta-analysis. In addition, the negative effect of central bank independence on inflation is greater in developed countries than in other countries.

Keywords

20.1001.1.17260728.1401.27.92.4.6

Main Subjects

Banking

References

Adeli, M. (1991). An Introduction to Central Bank Independence (1st ed.).Tehran: Monetary and Banking Research Institute. [In Persian]

Baumann, P., Schomaker, M., & Rossi, E. (2020). Estimating the effect of central bank independence on inflation using longitudinal targeted maximum likelihood estimation. Journal of Causal Inference, 9, 109-146.

Beju, D. G., Ciupac-Ulici, M. L., & Fǎt, C. M. (2017). Central Bank Independence and Inflation in EU-28. Land Forces Academy Review, 22(4), 253-262.

Bogoev, J., Petrevski, G., & Sergi, B. S. (2012). Investigating the link between Central Bank independence and inflation in Central and Eastern Europe: evidence from Panel Data Models. Eastern European Economics, 50(4), 78-96.

Borenstein, M., Hedges, L. V., Higgins, J. P., & Rothstein, H. R. (2011). Introduction to meta-analysis. UK: John Wiley & Sons.

Bryan, M. (2013). The great inflation. Federal Reserve History, Retrieved from: https://www.federalreservehistory.org/essays/great_inflation.

Buchanan, J. M., & Wagner, R. E. (1977). Democracy in deficit: The political legacy of Lord Keynes (Vol. 4). New York: Academic Press.‏

Chezani Sharahi, E. (2005). Central bank independence and its effects on macroeconomic variables. Tadbir Monthly, 161, 29-34. [In Persian]

Cochran, W. G. (1954). The combination of estimates from different experiments. Biometrics, 10(1), 101-129.‏

Cohen, J. (1988). The effect size index: d. Statistical power analysis for the behavioral sciences. Abingdon-on-Thames: Routledge Academic.‏

De Haan, J., & Kooi, W. J. (2000). Does central bank independence really matter? New evidence for developing countries using a new indicator. Journal of Banking & Finance, 24(4), 643-664.‏

Egger, M., Smith, G. D., Schneider, M., & Minder, C. (1997). Bias in meta-analysis detected by a simple, graphical test. Bmj, 315(7109), 629-634.‏

Eijffinger, S. C., & De Haan, J. (1996). The political economy of central-bank independence.‏ Special Papers in International Economics No. 19, Princeton.

Franzese Jr, R. J. (1999). Partially independent central banks, politically responsive governments, and inflation. American Journal of Political Science, 43(3), 681-706.‏

Ghanbari, M., & Mohammadi, T. (2017). Monetary political cycles and its relationship with central bank independence. Monetary-Banking Research Quarterly, 9 (30), 545-567. [In Persian]

Glass, G. V. (1976). Primary, secondary, and meta-analysis of research. Educational researcher, 5(10), 3-8.

Harrer, M., Cuijpers, P., Furukawa, T. A., & Ebert, D. D. (2019). Doing meta-analysis in R: A hands-on guide. Boca Raton, FL and London: Chapmann & Hall/CRC Press. doi: 10.5281/zenodo. 2551803.‏

Higgins, J. P., Thompson, S. G., Deeks, J. J., & Altman, D. G. (2003). Measuring inconsistency in meta-analyses. Bmj, 327(7414), 557-560.‏

Jácome, L. I., & Vázquez, F. (2008). Is there any link between legal central bank independence and inflation? Evidence from Latin America and the Caribbean. European Journal of Political Economy, 24(4), 788-801.‏

Klomp, J., & De Haan, J. (2010). Inflation and central bank independence: a meta‐regression analysis. Journal of Economic Surveys, 24(4), 593-621.‏

Kunaedi, A., & Darwanto, D. (2020). Central Bank Independence and Inflation: The Matters of Financial Development and Institutional Quality. Jurnal Ilmu Ekonomi, 9(1), 1-14.‏

Mathur, M. B., & VanderWeele, T. J. (2020). Sensitivity analysis for publication bias in meta‐analyses. Journal of the Royal Statistical Society: Series C (Applied Statistics), 69(5), 1091-1119.

McShane, B. B., & Böckenholt, U. (2018). Multilevel multivariate meta-analysis with application to choice overload. Psychometrika, 83(1), 255-271.

Meisel, A., & Barón, J. D. (2010). A historical analysis of central bank independence in Latin America: the Colombian experience, 1923-2008. Revista de Historia Economica-Journal of Iberian and Latin American Economic History, 28(1), 83-102.‏

Noghani Dokht Bahmani, M., & Mirmohammad Tabar, S. A. (2017). Meta-analysis Basics and Applications, First Edition. Mashhad: Ferdowsi University of Mashhad. [In Persian]

Parkin, M. (1987). Domestic monetary institutions and deficits. New York: Basil Blackwell.

Parvin, S., Shakeri, A., & Ahmadian, A. (2014). Assessing the effects of monetary policy balances in the country's banking network on key variables of the Iranian economy (random dynamic equilibrium general approach). Iranian Journal of Economic Research, 19 (58), 77-115.

Romer, D. (1993). Openness and inflation: theory and evidence. The quarterly journal of economics, 108(4), 869-903.‏

Walsh, C. E. (2011). Central bank independence revisited. Economic Papers: A journal of applied economics and policy, 30(1), 18-22.‏

Zarineghbal, H., Jafari Samimi, A., & Tehranchian, A. (2018). The Effect of Central Bank Independence on Output and Inflation Fluctuations in Iran. Economic Growth and Development Research, 8 (30), 33-54. doi: 20.1001.1.22285954.1397.8.30.2.7. [In Persian]

Zuckarelli, J. (2017). Central bank independence and inflation-new insights from a meta-regression analysis.‏ working paper (unpublished), https://www.zuckarelli.de/.

Meta-Analysis of the Effect of Central Bank Independence on Inflation

References

References

Volume 27, Issue 92 - Serial Number 92October 2022Pages 113-152

Volume 27, Issue 92 - Serial Number 92
October 2022
Pages 113-152