Impact of Trilemma Indicators on Macroeconomic Policy: Does Central Bank Independence Matter?
Published By: IGIDR on eSS | Published Date: July, 01 , 2015For a sample of 42 high and middle income countries analyzed over a period
of 30 years ranging from 1982 till 2011, this paper shows that while an efficient trilemma policy choice
can help lower inflation and improve growth, the independence of central banks from the domestic
political pressure, as measured in terms of the actual number of turnover of central bank governors, still
matters. This is especially true of middle income countries. A less independent central bank can worsen
the outcome derived from an effective trilemma policy choice. In addition, this paper shows that the institutional changes such as Inflation Targeting (IT) helps lower inflation without depending upon the level of Central Bank Independence (CBI) in a country as is suggested in the literature while the occurrence of general elections (ELEC) in any country exacerbates the macroeconomic outcome if a country grants lower autonomy to its central bankers.
Author(s): Geeta Garg | Posted on: Jul 31, 2015 | Views() | Download (455)