Relationship between Central Bank Independence, inflation and economic growth 1.

Introduction Central bank independence (CBI) has become a key concept in monetary theory and policy. CBI refers to the extent to which a central bank of any given country is independent from any influence, whether political or otherwise. A number of economists have observed that CBI is economically desirable as it is very crucial in reaching the long-term goal of price-stability. It is also the most recommended mechanism of reaching low inflation rates in any economy. The benefits of CBI have confirmed by the idea that more and more OECD countries have made their central banks independent. The peak of this trend is the creation of the (ECB), European Central Bank, which, according to its statutes, is the most independent central bank in the world. Many Countries have implemented reforms designed to grant their monetary independence from direct political influence. In early 1900 many central banks were accompanied by deep changes in central bank legislation in a bid to ensure their independence. This was common to countries which had previous history inflation. On theoretical grounds central bank reform has been informed by inconsistency of Kyland and Prescott models (1977) and Barro and Gordeon (1983). These showed government that were facing trade-off between inflation and unemployment are tempted to choose higher inflation than optimal inflation. However Ragoff ( 1985) proved that inflation ally bias could be reduced by delegating the monetary policy to an independent and conservative central bank. On the spherical side the evidence form developed countries supports the idea that increased central bank independence in negatively associated with inflation. Studies by Cukierman et al (1992) reported a negative relationship between legal CBI inflation and developed countries but failed to obtain similar results for developing countries.

2.

LITERATURE REVIEW

According to Cukierman central bank independence is freedom to pursue the objective of price stability and not unconditional independence from government. Cukierman identifies four different ranking of central bank independence. In additional he spells out that legal independence as the most vital determinant of central bank independence in the developed countries. In developing countries legal independence has not been adhered to. The rate of central banks governor also explains the rate of inflation. Central banks of developed countries are more independent than the developing countries. (William N. Toggins, 2008 P88-89) Central bank credibility can be realized by ensuring its independence through policy objective. An independent central bank is able to provide monetary policy with the consultation with the government. It is imperative to note that when monetary policy is put in place to address multiple objectives like inflation and unemployment then it brings about a lot of inconsistency. Antiinflationary policies may not be feasible as some government might be tempted to raise inflation so that to rise employment. Most Central banks of developed country have come up with measures to reduce time inconsistency in monetary policy. Central bank governors have been given a long tenure to avoid political pressure. In addition conservatives who dislike inflation are often appointed as governors. These measures have managed to keep the inflation low. Eventually they are able to maintain inflation low by putting pressure on the government to put in place disciplined fiscal policies. On the other hand central banks of the developing countries have less autonomy is pursuing monetary policy. Most developing countries consider rapid

economic growth more than price stability. Countries which dislike inflation ensure the independence of their central banks. (Akhand A. H. 2009. P52-54) The empirical evidence on the central bank independence and the real economy output is relatively thin. However there are two views of the same. One asks whether there is direct link between central bank independence and output. The seconds seeks to know whether CBI is related to the cost of disinflation. Economic theory suggests that central bank independence might impact on the real economy. Greater inflation avoidance by a conservative central bank may lead to Greater output volatility. Establishment of independent central bank does not necessarily increase the output volatility The relationship of central bank independence was published in the years 1988 to 1996. These studies confirm the inverse relationship of the central bank independence and the inflation. For the above statement to hold water CBI in developed countries should be measured by legal indices and in developing countries by behavioral indices. One of the early empirical studies on the central bank independence was carried out by Bade and Parkin who concluded that there exist a significant inverse relationship between CBI and inflation. Other known macroeconomic factors that influence inflation are the openness of the economies. It suggests that the openness and inflation are inversely related in a politically stable country. Political instabilities also might be a real cause of inflation. Central bank independence has effects on average rate of returns. Lower rate of inflation is associated with small we capital stock per man. More recent studies have confirmed the relationship between inflation and economic growth is inversely related. However the extent of growth losses remains controversial. A number of empirical studies

Suggest neither that long term growth nor the variability of growth correlate with the degree of central bank independence in the developed countries. The above view was held by De Haan and Eijffinger suggest that neither long term growth nor variability of growth correlate with the degree of central bank independence. (Nigel H., Barry H. R, 2003 p.433-437) Campillo and Miron have showed that central bank independence has no correlation with average inflation. Instead they argue that the degree of openness is an important factor in explaining inflation. Campillo and Miron affirmed that debt to GDP ratio in accounting for cross country inflationary variation. In this case, higher values of this ratio, being directly related to high average inflationary levels. They further suggest that the relationship between CBI and inflation breaks down under alternative measures of CBI. Sturm and de Haan observe that this relationship breaks down when influential observations are not included and when controlling for macroeconomic variables (Eijiffinger et al 1997). Franzese (1999) observed that the CBI has a very strong negative effect on inflation with high union density, un-open economy high inflation abroad, small financial sector low bargaining conditions and when the government is leftist. A recent study using panel regressions by Jacome and Vazquez (2005) found that legal Central Bank Independence and inflation are negatively related. The study was conducted in 24 Caribbean and Latin America countries. The study however, did not show the causal relationship running from inflation to CBI. In transitional economies, there is no relationship between CBI and inflation in the early stages but when controlled for unsustains levels of liberalization, wars and price deregulation, the relationship becomes inverse (Cukierman, Miller and Neyapti, 2002). A study by Lybek (1999), found an inverse relationship between CBI and inflation in the former Soviet Union. Price stability in majority of the OECD countries was achieved before more independence was given to the Central Banks (Daunfeldt and De Luna, 2003)

Other scholars Johnson and Sickles found little relationship between the measured responses of short term interest rates to political influences and measures the independence based on central banking laws. Eijiffinger and de Haan showed how central bank independence is related to factors such as natural rate of unemployment as suggested by Rogoff Model. (Carl E. W., 2003) 2.1 Central Bank Independence and Economic Growth. The evidence on CBI and economic growth is rather tenuous. In most cases, studies have shown no correlation between the two, but a few studies have shown a positive or fragile relationship between the economic growth and the CBI (Akhad 1998 and Fujiki, 1996). A scholar by the name Fuhrer (1997) observes that Central Bank independence is related to lower levels of economic growth and higher unemployment rate. This means that the stronger the CBI, the lower the rate of growth in the economy and the lower the employment levels. However, Jordan (1997) came up with the theory that it is only during periods of disinflationary that CBI matters. He puts forward that the higher the CBI, the higher the output loss and the higher the sacrifice ratio. Down (2004) collaborates to this finding. Due to this ambiguity in the relationship between the Central bank independence and the Economic growth rate, there is need to clarify the nexus between the two. As a result of wage and price stickiness and inflation and unemployment trade-offs in the short-run, there is a positive correlation between the growth rate in a given country and the inflation rate in that country. However, high and variable inflation in the long-run increases instances of uncertainties that reduce economic growth by discouraging investments that are long-term. Cukierman et al. (1993), Rudebusch and Wilcox (1994), Bruno and Easterly (1998) and Barro (1995) confirms this negative correlation relationship between inflation and economic growth.

It is evident, from the foregoing, that there is no conclusive evidence of the relationship between the economic performance and the Central Bank Independence. This is a clear indication that more rigorous analysis should be done on the issues concerned. For instance, while it is a known fact that Central bank independence is one of the several factors that could affect inflation, it is not clearly so in the case of economic growth. Unless we relate inflation to economic growth then to CBI, we cannot be able to determine the relationship between the two conclusively. However, it is very vital to try and measure the relationship of the two. While doing this, care should be taken to ensure that the measurement of central bank independence is not biased. All critical issues should be put into consideration. (Toggins N. W,2008, P 89-91) 2.2 Effects of political systems on the relationship between CBI and economic growth. As earlier stated, the relationship between the CBI and the economic growth has not been clearly analyzed. However, many scholars have suggested that they are negatively correlated. The question now is; does political stability or instability affect this relationship? The main role of central bank is to control inflation. They have the power to create the nationals currency which means that central banks have vital roles in economic management. The majority of central banks are state owned, which means that the central bank governor is a government official. The governors and politicians may have differing views on policies and it is at this point that the Central bank Independence and political authority become significant. In the recent past, central bank independence has been increased in a move to restrict the avenues for political influence in monetary policy and decision making. In doing so, monetary policy will be free from political business cycles hence the economic growth will not be affected. Central bankers, although appointed by government officials, are assumed to be capable of making independent

decisions even if these decisions conflict with the government. CBI has become a legal standard with a trend towards more independence and thus more control on inflation. A normative for CBI revolves around the fact that central bank governors are more averse than politicians when it comes to matters of inflation. Despite this fact though, the CBI theory of controlling inflation is flawed. This is because inflation is determined by a number of factors which includes credit creation and money supply increase which are not in the control of Central bank. Increased CBI also raises issues on accountability. The central bank governors are legally accountable to the elected politicians. These politicians may have differing opinions on the issues and this raises questions on the extent of central bank independence. The politicians have a say in the long-run in regards to decisions of controlling inflation and therefore controlling the economic performance. In conclusion, political systems have a huge impact on the relationship between Central Bank Independence and the economic growth. The Central bank governors are accountable to elected politicians who are prone to pushing their agenda in the decisions of the Central bank. This affects the monetary policies laid down by the central bank to control inflation which in turn affects the economic performance. Further, the transparency of Central bank and political systems differ. While Central bank independence and fixed exchange rates are alternative monetary commitments that differ in transparency, transparency of monetary commitments and political systems are perfect substitutes (William T Bernhard, Lawrence Broz and William Roberts, 2003). It is due to this fact that the government should look for a more transparent and constrained commitment such as the fixed exchange rate when the political decision making is not transparent. In this way, the

transparency of the monetary commitment will serve to substitute the political system to engender policies of low inflation. In cases where political systems are transparent, commitments to CBI can produce very low inflation because the private agents and the opposition side of politicians are free to monitor, detect and punish government interference in central banks decisions. Studies indicate that CBI is more effective in controlling inflation, and thus economic performance, in nations where levels of political transparency is high. That is to say, politics have more influence in nations with autocratic politics as opposed to nations with democratic politics where Central Bank Independence has more impact. (Wankel C. 2009, P250-251) 2.3 Effects of Unemployment rate to the relationship between CBI and Economic performance Recent studies have shown that the relationship between unemployment and inflation varies with the degree of central bank independence. The findings by scholars indicate that an increase in the central bank independence tends to raise unemployment levels and inflation especially when the centralized wage bargainings (CWB) are low. At intermediate and higher levels of centralized wage bargainings, an increase in Central bank independence tends to reduce the rates of unemployment and inflation. A recent study by Kilponen (1999a) supports the argument that increased CBI raises unemployment levels. Kilponen does an estimation of a pooled annual time-series model for 17 countries that are members of OECD for the years 1973 to 1996. This annual series includes a number of institutional variables controlling. The estimates from the study suggest that there is a positive correlation relationship between the central bank conservatism and the rate of unemployment. However, the central bank independence lowers the rate of unemployment. This

study helps us to understand why there is a negative relationship between the CBI and unemployment at higher levels of centralized wage bargainings. Inflation, according to the study, is significantly negatively correlated with Central Bank independence but not with conservatism of the central bank. Kilponen does not however, provide a conclusive test for the interaction between the central bank characteristics and the centralized wage bargainings. Iversen (1998a, 1998b, 1999) reports broadly similar relations between the unemployment rate and the inflation, but finds that an increase in the CBI increases unemployment at higher levels of CWB and lowers it at intermediate levels of CWB. This implies that unemployment affects the relationship between CBI and inflation. Inflation strictly increases in Central bank independence. There is no conclusive evidence on the effects of unemployment to the CBI inflation relationship. The data sets and empirical set-ups differ widely and so the results are far from conclusive. For instance, unemployment has been found to have both effects on the CBI i.e. to increase and decrease in the CBI at any level of CWB. However, the recent studies have more support than previous studies. The studies have shown the importance of merging the aspects of CBI and CWB in determining the relationship between inflation, unemployment and central bank independence. The change of unemployment induced by increase in the level of central bank independence has been found to have both negative and positive relationship. This is perhaps a result of the heterogeneous econometric set-ups employed so far. The approaches of scholars differ widely with regards to the data and models used. Another problem with the studies conducted so far is that they use central bank independence to characterize monetary policy while on the other hand, theoretical predictions focus on the conservatism of central bank. (Sayer S., 2001, P 200-201

2.4 Effects of government expenditure on the relationship between CBI and economic growth Policy makers have two opposing opinions on whether government spending helps or hinders economic growth. On one side, it is argued that government spending provide valuable goods to the public and boost economic growth by putting money into peoples pockets. On the other hand, it is argued by proponents of smaller government that the government is too big and through its spending, it transfers additional resources from the hands of the private sector which is more productive to the hands of the government which uses the resources less efficiently and thus, undermining the economy. There is no conclusive evidence on either of these opinions. Indeed, it is argued by almost all economists that there are times when higher levels of government spending enhance the growth in the economy and other situations in which, lower levels of government spending enhance economic growth. (Mitchell Daniel, 2005) Douglas, Gregory and Lawrence, 2008 in their investigation of whether Central bank independence is associated with the government budget balance found out that there was no significant effect. They argue that this could be a result of lack of significant spending by governments in medium-constraints states. Alternatively, the lack of significant effect could be a result of decline of interest rates which is associated with reduced inflation. We may conclude that in cases where government spending is too significant as to affect the inflation rate in a particular country, the CBI is also affected as the central bank tries to control the inflation. However, this is not always the case and economists need to do more research on this topic. (Douglas W. E, Gregory M. N, Lawrence H. S, 2008, P402)

3.EMPIRICAL STUDY 3.1 Central Bank Independence and Inflation There exists empherical evidence that CBI helps to reduce inflation. This evidence generally consist of different country regressions using proxies of CBI based on statutes of central bank or the turnover of governors. Cukerman (1994) summarizes the empherical correlation between CBI on one hand and the inflation and economic growth on the other hand as follows. Legal central bank independence indices are negatively correlated with inflation but turnover rate of central bank governors has no correlation with inflation in developed countries. 3.2 Central Bank independence and Conservativeness Economic growth has no correlation with CBI indices among industrialized countries. The legal CBI index of Cukierman is not correlated with inflation, but TOR of Cukierman et al among developing countries. The TOR is correlated with economic growth whereas legal indices are not correlated with economic growth among developing countries. It is assumed that policy makers seek to minimize the loss function which represents the preferences of the society. (S. StuartS2001) = + )2 Equation 3.1

Yt denotes out put , Y* represents desired output and is government weight on output stabilization ( X>0 . Output is simplified by Lucas supply function.

Equation 3.2 Where denotes actual inflation and e denotes expected inflation and is a random shock with Zero

mean. Policy makers seek to minimize inflation and with rational expectations inflations turns out to be =X equation 3.3

The first term is inflationary Bias with credibility problem. The second term denotes degree of stabilization of out put shocks of inflation. (S. StuartS2001) Scenario 2. Suppose the central bank is more independent and the governor is a conservative baker who prefers a lower inflation than the government. This implies that the banker is more inflation averse than the government. =X + ( )2 Equation 3.4

Where

denotes the additional inflation aversion by the central banker.The Central bank is relevant only

when it is able to determine the monetary policy. This can be modeled as follows = +( ) Equation 3.5

Denotes the degree of central bank independence to the extent of the central bank loss function. If =1 this implies central bank is independent and hence fully determines the monetary policy . In this case with a rational expectations inflation will be as follows. (While minimizing the government loss)

Equation 3.6

If we compare equations 3.3 and 3.6 one can easily see the inflationary bias of at right side of the equation. In this case one can conclude that delegating monetary to a conservative central bank leads to a low inflation. However there exist optimal level of independence versus conservativeness ( ) In the equation 1.6 both inflation and CBI matters . Its imperative to note that if that if the central

bank has the same degree of inflation averseness with the central government then the independence does not matter. Holding all other factors constant increasing the bank conservativeness and consequent increase in independence then inflation will be decreased or else they will adopt a inflationary averse monetary policy. (S. StuartS2001)

3.3 Data analysis Table 3.1

Correlations Developed Countries Inflation Inflation Pearson Correlation Sig. (2-tailed) N CBI Pearson Correlation Sig. (2-tailed) N 5 .062 .922 5 5 1 CBI .062 .922 5 1

Table 3.2
Coefficientsa Standardized Unstandardized Coefficients Model 1 (Constant) Inflation a. Dependent Variable: CBI B .565 .012 Std. Error .275 .115 .062 Coefficients Beta t 2.052 .107 Sig. .133 .922

Table 3.3

Coefficientsa Standardized Unstandardized Coefficients Model 1 (Constant) INFLATION a. Dependent Variable: CBI B .551 .001 Std. Error .100 .001 .414 Coefficients Beta t 5.505 .787 Sig. .012 .489

Table 3.3

Developed country Canada Switzerland United Kingdom Italy United States

CBI 0.45 0.64 0.47 0.92 0.48

Inflation 2.738 1.559 0.87 2.575 3.357

Figure 3.1

Table 3.2

Canada has a CBI of 0.45 and the rate of the inflation rate stands at 2.738 . Whereas a country like United King dom has almost similar CBI and and a lower inflation rate. A country like the united states has a CBI of 0.48 and and a corresponding infaltion rate of 3.357. These countries have a relatively independent central bank and have put in place corresponding monetary policies to ensure that the inflation is mantaines at a minimum. These is a scenario of inflation averse countries. In addition the countries have ensured that the central bank governors have a long term in their office and ensure that the central bank is conservative in nature. In that it prefers to maintain the status quo and thus ensuring price stability. Some scholars have explored other ways of mantaining price stabilty while ensuring that the inflationary averse.These countries explore the option of sustainable fiscal policy. Price stability means the inflation rate measured in on the basis of counsumer price index and must not exceed 1.5 percent that of the best performing countries. Table 3.3

Developing countries Kenya Botswana

CBI 0.5 0.45

INFLATION 9.955 8.34

Croatia Ire land Belarus

0.44 0.84 0.73

4.69 5.24 168.8

Table 3.4

Correlations Developing Countries CBI CBI Pearson Correlation Sig. (2-tailed) N INFLATION Pearson Correlation Sig. (2-tailed) N 5 .414 .489 5 5 1 INFLATION .414 .489 5 1

Figure 3.3

Figure3.4

Canada and Botswana have similar CBI at 0.45 but the inflation rate stands at 2.78 and 8.34 percent respectively. This leads to the question why are their inflation levels different? and yet they have similar CBI. Other issues might have led to higher inflation rate in the case of Botswana. In light of the above it is imperative to investigate what other factors that might have led to a higher inflation.

Cukierman (1992) and and web(1995) developed two proxies of independence. The rate of turnover of central bank governor and political vulnerability index ( VUL) . TOR is inversely related to of average tenure of central bank governor in years. In countries with a single board structure such as France, Canada , Portugal and Bulgaria the president determines the rate of TOR

=1
The logic behind TOR is that he more a central bank governor is in the office is able to defend him herself from the broad caster or the government. On the other hand VUL in some countries like Spain the term of central bank governor is in tandem with the political changes. For instance the moment the one government ceases to be in power then the contract automatically expires and a new governor is selected. 4. CASE STUDY 4.1 Central bank independence and corruption 4.1.1 Case study of Euro-member Countries For many decades now, there has been a wide acceptance of corruption as a fact of life that is inevitable which helps remove government rigidities and greases the mechanisms of the otherwise rigid government. However, there has never been any doubt that corruption a serious hindrance to economic growth and development. In the recent years, corruption has been identified as a major international problem which undermines economic, social and political development. Corruption, as observed by North (1990), tends to hinder economic growth. It creates uncertainties that are disadvantageous to the

economic process. Mauro (1995). Generally, corruption affects the macro-economic performance of any country. Empirical research on corruption can be grouped into two categories. The first category has its focus on what causes corruption and the determinants of corruption. Scholars have observed that the main causes of corruption ranges from lack of competition, political systems, distortions in policies and the level of public transparency. The second category deals with the measures that can be taken to combat corruption in any one given economy. The Central bank independence is one of the major instruments that can be used to combat corruption and its effects. The central bank independence has been increased in various countries to enhance transparency in monetary policy-making which in turn facilitates accountability. In this way, corruption is reduced to a great extent. CBI also plays a vital role in reducing money laundering, which forms the highest type of super corruption that exists. (Cf. Winkler, 2000). In the recent past, CBI has been discussed as a major issue in talks on improvement of the economic performance through institutional reforms. Studies have suggested that when CBI is coupled with an objective to stabilize the prices, there is a general improvement in economic performance, increase in real growth and lower budget deficits. Perhaps it is for this reason that the European Union has put CBI as a pre-condition for membership in the Economic and Monetary Union. The table below shows the Corruption Perception Indexes (CPI) in the Euro states for the periods 1998 and 1999 as reported by transparency international. The table shows that the member states tend to hold their positions although there are some particular minor changes. The average CPI is higher in 1999 showing an improvement in the perception of corruption in these countries.

Table 1. The 1998-1999 CPI for members of the Euro-Area. Country 1998 CPI Score Austria 7.5 Belgium 5.4 Finland 9.6 France 6.7 Germany 7.9 Ireland 8.2 Italy 4.6 Luxembourg 8.7 Netherlands 9 Portugal 6.5 Spain 6.1 Average 7.29 Source: Transparency international NB: the data range from 10 (highly clean) to 0 (highly corrupt). Comparing data for the Euro-member countries that enjoy a high CBI with non-member countries with lower CBI indicates higher CPI in the former than in the latter. 4.1.2 Empirical evidence from Developing Countries The developing countries are the worst affected by corruption. A sample of developing countries done in 1995 shows that corruption is associated mainly with lower central bank independence. Developing countries in most cases have lower degree of central bank independence. This increases the degree of corruption in these countries. In this section an empirical analysis of the association between central bank independence and corruption is carried out with the use of data that is available for a sample of 18 developing countries in 1995. The central bank independence index used is the Cukiermans actual index 22 and corruption indexes used were reported by the transparency international. 1999 CPI Score 7.6 5.3 9.8 6.6 8 7.7 4.7 8.8 9 6.7 6.6 7.34

Table 2. Below shows the CBI and corruption: cross-section weighted least squares, estimated regression results, 1995 (dependent variable: Corruption) Models with different weighting series (1) (2) 3.05* 4.03* (11.12) (4.21) 0.337* (12.01) -0.0033* (-23.66) 18 0.999 10781.7 0.294*** (1.77) -0.0044** (-2.77) 18 0.772 29.7

(3) 4.33* (4.19) 0.657** (2.17) -0.0115** (-2.32) 18 0.790 33

Constant

Central Bank Independence index Inflation

No. of observations Adjusted R-squared F-test

Note: (*), (**) and (***) denote, respectively, significance at the 1%, 5% and 10% levels. The numbers in Parenthesis are hetroscedasticity-consistent t-statistics using different weighting

series. The weightings series in models (1), (2) and (3) are Inflation, CBI and CPI respectively. A high score of CPI indicates a low corruption level in all models. A high level of CBI indicates a high level of independence. Model (1), which has a high adjusted R-squared may be preferred to the rest. In conclusion, the CBI has been displayed by this paper as a kind of macro-economic reform that can be significantly used to alleviate the effects of corruption particularly in developing countries which bears the worst consequences. It is clear from the sample of developing countries 1995 that corruption is associated with lower CBI and thus countries with lower CBI have very high levels of corruption. This observation is not conclusive though. However, other factors held constant, reforms aimed at increasing the independence of the central bank, will tend to significantly reduce corruption. (Samimi Ahmad J.2001)

Appendix 1

Country Name Albania Argentina Armenia Australia Austria Belgium Bulgaria Belarus Bolivia Brazil Barbados Botswana Canada Switzerland Chile China Colombia Costa Rica Czech Republic Germany Denmark Spain Estonia Ethiopia France United Kingdom Georgia Ghana Greece Honduras Croatia Hungary Indonesia India Ireland Iceland Israel Italy Japan Kazakhstan Kenya Kyrgyz Republic Lebanon Lithuania Luxembourg Latvia Morocco Moldova Mexico Malta Mongolia

CBI( 2000) 0.51 0.74 0.85 0.36 0.88 0.89 0.55 0.73 0.63 0.21 0.38 0.45 0.45 0.64 0.77 0.29 0.44 0.61 0.73 0.92 0.5 0.86 0.78 0.44 0.78 0.47 0.73 0.48 0.89 0.55 0.44 0.67 0.8 0.34 0.84 0.34 0.7 0.92 0.47 0.44 0.5 0.52 0.4 0.78 0.9 0.49 0.14 0.73 0.56 0.38 0.55

Inflation

0.039 -0.939 -0.791 4.475 1.959 2.678 10.317 168.601 4.602 7.056 2.436 8.534 2.738 1.559 3.843 0.4 9.221 10.961 3.801 1.4 3.137 3.484 4.011 6.159 1.827 0.867 4.04 25.151 2.898 11.016 4.629 9.799 3.773 4.009 5.254 5.011 1.139 2.575 -0.777 13.33 9.955 18.71 -0.356 1.081 3.151 2.637 1.923 31.206 9.492 3.04 11.583

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Berd H, Carsten H, (2001), Do we really need central bank independence? A critical examination, University of Basel, P1 Carl E. W., (2003) monetary theory and policy, MIT Press, Part 5; Parts 216-244. Daniel M., 2005, the impact of government spending on the economic growth, http://www.heritage.org/research/reports/2005/03/the-impact-of-government-spending-oneconomic-growth Douglas W. E, Gregory M. N, and Lawrence H. S, (2008) Brookings papers on Economic activities, springer, P 402 Luis I J, Francisco F. V, (2005), Any Link between Legal Central Bank Independence and Inflation? Evidence from Latin America and the Caribbean, International Monetary Fund. Monetary and Financial Systems Department. Nigel H., Barry H. R., (2003) Central Banking in Eastern Europe Volume 11, Routledge International Studies in Money and Banking. P.433-437 Samimi Ahmed J. (2001), Corruption and central bank independence: Evidence from developing countries, University of Mazandaran at Babolsar, Iran Sayer S. (2001), issues in new political economy, Wiley-Blackwell, P 200-201 Wankel C. (2009), Encyclopedia of Business in todays world, Volume 1, Sage Publishers, P250251. William N. T, (2008), New Econometric Modeling Research, Nova Publishers, P88-89