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The majority of the empirical literature about the effects of central bank independence on disinflation costs found a positive relationship between these variables, meaning that more costly disinflationary episodes are related to countries with more independent central banks. This result contradicts the new classical theory, which states that there is a credibility premium in terms of disinflation costs for monetary policy. However, the dominant econometric method used for most of these works is Ordinary Least Squares, a technique incapable of controlling for the existence of endogeneity or selection bias. In that sense, the present work aims to contribute to the existing literature by aplying models based on propensity score, an econometric method capable of dealing with the possible existence of selection bias in the relationship between central bank independence and disinflation costs. The results obtained indicate that, when the propensity score is used, a statistically insignificant effect of the central bank independence on disinflation costs is found. Therefore, these results suggest that a country is capable of granting more independence to its central bank, in order to reduce inflation, without facing additional costs in terms of its economic activity.

Reavaliando a relação entre independência do Banco Central e custos de desinflação: uma análise de viés de seleção