The Effect of Central Bank Independence on Price Stability: The Case of Indonesia | Zendy

Yessy Andriani | Zendy; Prof. Prasanna Gai | Zendy

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The Effect of Central Bank Independence on Price Stability: The Case of Indonesia

Author(s) -

Yessy Andriani,

Prof. Prasanna Gai

Publication year - 2013

Publication title -

deleted journal

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.505

H-Index - 4

ISSN - 2460-9196

DOI - 10.21098/bemp.v15i4.431

Subject(s) - inflation (cosmology) , central bank , economics , independence (probability theory) , governor , ordinary least squares , order (exchange) , price of stability , econometrics , inflation targeting , stability (learning theory) , monetary economics , index (typography) , monetary policy , macroeconomics , mathematics , statistics , finance , computer science , engineering , physics , machine learning , theoretical physics , aerospace engineering , world wide web

This paper investigates the relationship between central bank independence (CBI) and inflation in Indonesia during 1970-2006. Using partial adjustment Ordinary Least Square (OLS) and Engel Granger Error Correction Model, the result shows that legal CBI index inversely affect the inflation, while the turnover of governor is not significant. This result emphasizes Bank Indonesia to strengthen its independency in order to achieve his inflation target. Keywords : Central bank independency, Inflation, Error Correction Model. JEL Classification : C32, E58

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