Central bank independence and economic growth

• Autor(a) principal: Casinhas, Luís Miguel Clemente
• Data de Publicação: 2019
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/18974
• topic: Dynamic inconsistency; Central bank independence; Inflation; Economia do desenvolvimento; Crescimento económico -- Economic growth; Banco central -- Central bank; Autonomia; Inflação

This research aims to estimate the relationship between Central Bank independence and economic growth. Adopting the Arellano-Bover (1995)/Blundell-Bond (1998) two-stage estimation method for dynamic panel models, we analyse a sample of 186 countries from 1970 to 2018. After controlling for the standard economic growth determinants, we consider the legal and the actual independence of Central Banks (measured by an irregular turnover dummy for the Central Bank Governor) as our variables of interest. We find that when an irregular turnover occurs it harms growth and that the legal independence framework is not statistically significant. Furthermore, we conclude that these results are robust for middle-income countries, in countries which had experienced a crisis (among banking, currency and sovereign debt), in countries that do not adopt quantitative easing policy measures and in countries that are not part of monetary unions. The legal independence is a positive factor for growth when restricting to countries belonging to monetary unions. We also find that growth is not affected by Central Bank independence when countries are divided by continents.