Does Central Bank Independence have any effect on inflation in Sub-Saharan African Economies?

ABSTRACT

This paper aims at assessing the potential effect of central bank independence on inflation in the Sub -Saharan countries. It suggests an extended empirical approach that distinguishes various measures of de jure and de facto independence. Results based on a panel data model of inflation clearly indicate that greater independence does indeed translate into decreased inflation. More specifically, de jure independence tends to matter more than de facto independence, and all of the political, legal and economic aspects of independence seem to be equally important. These results could further convince political authorities in the sub-continent about the necessity of less interference with the monetary authorities for the benefit of more stable dynamics of their economy.