THE EFFECTS OF CENTRAL BANK INDEPENDENCE ON ECONOMIC GROWTH: NEW GENERATION PANEL DATA ANALYSIS ON THE EU COUNTRIES (1995-2015)

Abstract

In this study, the effects of the level of statutory independence of the central bank on economic growth in the European Union (EU) member countries are examined econometrically in the context of new generation panel data analysis methodology for the period 1995-2015. In the study from this aspect, it is aimed to empirically assess whether the level of statutory independence established for the maintenance and sustainability of price stability which is the main objective of central banks in the EU countries, has an effect on the economic growth performances of member countries as is predicted in the theoretical framework. As a result of the study, it was determined that of the level of statutory independence of the central bank in EU countries had a positive direction and statistically significant effect on economic growth during the review period. These results show that the predicted effects on the theoretical framework of the level of statutory independence of the central bank on economic growth are also empirically valid in the EU countries as of the study period. However, the results suggest that of the levels of statutory independence of the central banks with the current structure have also a significant impact on the real economic growth performance of the EU countries is enhanced and achieved sustainability in the long-term.