Munich Personal RePEc Archive

A Revisit of the Relation between Central Bank Independence and Inflation

Lin, Hsin-Yi (2009): A Revisit of the Relation between Central Bank Independence and Inflation. Published in: The Empirical Economics Letters , Vol. 9, No. 2 (February 2010): pp. 139-143.

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Abstract

Conventional wisdom argues that the relation between central bank independence (CBI) and inflation is negative. However, empirical studies based upon regressing inflation rates on CBI tend to reject this hypothesis and show that there is no negative relationship. This article investigates the effect of CBI on inflation by quantile regression. The empirical result shows that the relation could be negative or positive for different quantiles of inflation. Quantile regression provides a method for investigating the relation completely between CBI and inflation.

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