Title : Central Bank Independence, Speed of Disinflation and the Sacrifice Ratio
Author(s) : Giuseppe Diana, Moise Sidiropoulos
Abstract : This paper examines the impact of central bank independence on inflation persistence. Our theoretical analysis predicts that a higher degree of central bank independence leads to a lower inflation persistence and therefore to a higher speed of disinflation. The empirical results, provided using a 18 OECD countries sample, show that central bank independence is negatively related to the degree of inflation persistence. In addition, as there is a positive correlation between inflation persistence and the sacrifice ratio, we conclude that central bank independence, through its influence on inflation persistence, is negatively correlated to the sacrifice ratio.
Key-words : central bank independence, inflation persistence, speed of disinflation, sacrifice ratio
JEL Classification : E31, E52, E58