Enhancing the independence of the monetary authorities to mitigate inflationary bias is seen as a crucial political decision. Many countries, by adopting this approach, have assured their economies that controlling inflation and achieving macroeconomic stability are binding constraints for political authorities. Some countries enshrine such independence in their constitution, others through legislation related to the central bank, while some adhere to it in practice without any legal mandate. With the introduction of the new Central Bank Act, questions arise about whether this principle has been upheld. This study employs prominent independence measurement indicators, namely the Cukierman Index and the Grilli Index, to assess the Central Bank's independence under both the Monetary and Banking Act and the new Central Bank Act, as well as to compare it with other countries’ central banks’ independence. The results indicate that, compared to the Monetary and Banking Act, the new Central Bank Act has increased the Central Bank's independence by 16.6% based on the Grilli Index and by approximately 7% based on the Cukierman Index. However, despite these improvements, the legal independence of the Central Bank under the new act remains within the lowest 25% globally.

This paper critically reviews the Central Bank of the Republic of China (Taiwan) Act and finds that the level of legal independence of the Central Bank is relatively low compared to the rest of the world. However, Taiwan has been able to combine low inflation with a legally dependent Central Bank. In this paper an attempt is made to provide the possible explanations to this low inflation/low independence puzzle in Taiwan and argue that Taiwan should still follow the trend of creating a more independent Central Bank.

We consider the optimality of various institutional arrangements for agencies that conduct macro-prudential regulation and monetary policy. When a Central Bank is in charge of price and financial stability, a new time inconsistency problem may arise. Ex-ante, the Central Bank chooses the socially optimal level of inflation. Ex-post, however, the Central Bank chooses inflation above the social optimum to reduce the real value of private debt. This inefficient outcome arises when macro-prudential policies cannot be adjusted as frequently as monetary. Importantly, this result arises even when the Central Bank is politically independent. We then consider the role of political pressures in the spirit of Barro and Gordon (1983). We show that if either the macro-prudential regulator or the Central Bank (or both) are not politically independent, separation of price and financial stability objectives does not deliver the social optimum.

Studies conducted on the relationship between central bank independence and inflation show heterogeneity in the results. Some of these studies have concluded a negative relationship, while others have concluded a positive or insignificant relationship between central bank independence and inflation. The purpose of this study is to conduct a multilevel meta-analysis to examine the effect of central bank independence on inflation. For this purpose, all full-text articles that examined the relationship between central bank independence and inflation were reviewed. After reviewing the content and results, 58 studies were selected to enter the meta-analysis based on the meta-analysis protocol. Data from 58 selected studies included 619 regressions and 913 coefficients that were extracted and coded. In the first level of meta-analysis, the regression coefficients of each study were combined and the effect size of each study was calculated. In the second level of meta-analysis, to calculate the total effect size, the effect size of 58 studies was determined according to the weight of each study. The result of the combination and conclusion of individual studies shows that the independence of the central bank has a small negative and significant effect on inflation. The results also showed that the type of index used to calculate the degree of central bank independence affects the relationship under meta-analysis. In addition, the negative effect of central bank independence on inflation is greater in developed countries than in other countries.

This paper assesses the relative effectiveness of Central Bank independence versus policy rules for the policy instruments in bringing about good economic performance. It examines historical changes in (1) macroeconomic performance, (2) the adherence to rules-based monetary policy, and (3) the degree of Central Bank independence. Macroeconomic performance is defined in terms of both price stability and output stability. Factors other than monetary policy rules are examined. Both de jure and de facto Central Bank independence at the Fed are considered. The main finding is that changes in macroeconomic performance during the past half century were closely associated with changes the adherence to rule-based monetary policy and in the degree of de facto monetary independence at the Fed. But changes in economic performance were not associated with changes in de jure Central Bank independence. Formal Central Bank independence alone has not generated good monetary policy outcomes. A rules-based framework is essential.

The purpose of this paper is to evaluate and measure the central bank independence and its determinants in Iran. To calculate the degree of central bank independence different indices such as Grilli et al (1991), Cukierman et al (1992), Mathew (2006) and Dumiter (2009) have been used. Also, the monetary and banking laws of 1960 and 1972 and their revisions as well as other new laws related to central bank independence during 1960 - 2012 were taken into consideration to measure the trend of the central bank independence in Iran. The paper findings indicate a decreasing trend of the central bank independence in the country based on almost all different indices during the period under consideration. Also, it is shown that the development laws especially after the Islamic revolution has been among important factors affecting the degree of the central bank independence in Iran.