Abstract:
In this paper, we explore the connection between Central Bank Independence (CBI)
and inflation under alternative political regimes. We formulate a predictive model that
accommodates CBI in the analysis of inflation and thereafter we regroup the countries
based on the choice of political regimes as well as the level of development. We find that
CBI has a statistically significant and negative effect on inflation in countries adopting
full democratic and partial autocratic regimes; but are statistically insignificant in
countries operating full autocratic and partial democratic regimes. The results leading
to this conclusion are robust to different levels of development.
