Central Bank Independence On Inflation Rate -Myassignmenthelp.Com

Question: Discuss About The Central Bank Independence On Inflation Rate? Answer: Introduction The next chapter is related to the literature review on analysing the effect of independence of central bank on the rate of inflation. The different analysis is required to be identified in an effective manner as this will help in understanding the effect of the CBI reforms on the rate of inflation(Bodenstein, Erceg and Guerrieri 2017). The entire literature review will help in understanding the different CBI reforms as this will help in achieving the stable kind of information in an effective manner. The literature review will help in discussing the different totalitarian countries, the CBI reforms do not affect the inflation rates of such countries. The different view of the authors will be addressed in the next section of literature review that will help in analysing the political kind of instability and the effect of independence of central bank in an effective manner(Reis 2015). In short, the governments benefit from central bank that helped them in increasing the supply of money in an effective manner. There are different kind of frameworks that has to be considered effectively for assessing the different effects in an effective manner. The policy framework that is monetary in nature will help in influencing the activity that is macroeconomic in nature in three different manners that are as follows: There is short-term trade-off between inflation levels and unemployment that can be shown with the help of Phillips curve trade off There is long-run trade off between the different fluctuations in inflation along with real activity that can be shown with the help of Taylor trade off The trend growth will be shown as real GDP Literature Review According to Blancheton(2016), there is a negative kind of relationship between level of the bank interdependence of central bank along with inflation. However, on the other hand, it can be seen that Edwards (2015) commented that CBI has no influence on lowering of the inflation and there is requirement of the different investigation required for the same as well. It can be seen that there are different countries such as North America, Oceania and Northern Europe that will help them in understanding the effects of CBI on inflation in different countries(Fernndez-Alberto 2015). Moreover, there are different kind of previous studies that helped in indicating the various countries that faced different kind of effects of CBI reforms. Doumpos, Gaganisand Pasiouras(2015)concluded that problems related to inflation has to be solved as this will help in focusing on the change of the CBI in place of level of CBI. Moreover, it can be seen that Bodea and Higashijima(2017) used different random effects along with random model of coefficient that helped them in showing that the different reforms of CBI are not relevant and it was that the CBI reforms were not in connection with effecting the rate of inflation. Sims (2016) commented that the governments will benefit from the central banks and this will help them in increasing the supply of the money along with inflation. The expanding the government expenditure will be funded with credits from different non-independent kind of central banks. On the other hand, Neuenkirchand Neumeier(2015) commented that most of the government institutions in the entire world prefer to utilize the economic policy that is expansive in nature financed by different kind of supply of money as this will help the companies in balancing the supply of money in an effective manner. Furthermore, the main objectives of the central bank helped in stabilizing the consumer price index as this will help in facilitating and maintaining equilibrium of the balance of the payments that is international in nature(Rey 2015). The economic kind of recession and stagflation will be caused that will affect the increase in inflation along with supply of money. It helped in formulating the monetary policy that will deal with the rate of inflation and this will help the central bank to create positive effect on the rate of inflation as well(Bodea, and Hicks 2015). Furthermore, it can be seen that there are different kind of effects of inflation on long term growth wherein there are different kind of studies that has been conducted and this has helped in understanding the entire relationship between economic growth and inflation that will help in analyzing that low kind of inflation is good for the entire growth of the economy in an effective manner. Masciandaro and Romelli (2015) commented that there are different kind of studies that has been conducted wherein it has been seen that basic funding is that the higher rate of inflation goes along with the economic growth that is low in nature. Furthermore, it has been seen that there are adverse effects of the higher rate of inflation on the different economic kind of outcomes that is essential in nature (Garriga 2016). This kind of pattern has helped in showing that the rate of inflation is in excess amount that is more than 15-20% that cannot be isolated and this will be requiring extra effort in making the rate of inflation effective. The new kind of index of the central bank independence along with the targeting of influence has few linkages that have to be analyzed in an effective manner. The entire new kind of index of the central bank independence and the targeting that was constructed in an effective manner and is conceived as the sum of numerical values that is assigned to more than thirty eight arrangements that is institutional in nature. It has been seen that there are different kind of circumstances wherein the companies need to understand the issues between the independence of the central bank and the rate of inflation. There are different issues in the rate of inflation wherein the different kind of sources of pillars has to be analyzed and identified in an effective manner. The central bank independence has to be analyzed in such a manner that wills the company in solving such issues effectively. These kinds of services have to be analyzed effectively as this will include the involvement of the three different pillars of the central bank independence along with the rate of inflation. Structure of the Index There are different kind of pillars of the entire index that includes the legal and political kind of central bank wherein the central bank independence refers to the different freedom and flexibility that is required to be permitted to the entire central bank by legislation. There are different empirical findings that have helped in analyzing that the central bank refers to the different legislative protection of the different policy and operational formulation kind of activity in the way or process that is required to be enforced wherein the law will be enforced in an effectual manner. The second kind of pillar is the central bank conduct of monetary policy and conduct of governance that will include different kind of features that include monetary policy strategies and monetary policy objectives along with the policy of exchange rate in an effective manner. This kind of second pillar will help in supervision of the bank, fiscal and financial independence (Masciandaro and Romelli 2015). The third kind of pillar of the entire index is the central bank transparency along with accountability. The transparency in the central bank will help in understanding the degree of the understanding of the entire monetary policy along with process of policy decisions by the public in an effectual manner. Furthermore, it has been seen that the central bank have been associated with the different kind of secrecy as the central bank will become more independent that will have to be more accountable in nature. The model The entire empirical evidence on the entire performance of the central banks independence that do not suggest qualified access. However, there are different kind of cases wherein the consistency of the indices are based on different kind of interpretations of the statuses of the central bank independence and this helps in analyzing as well as measuring the independence of the central bank. In addition, there are correlations between the central bank independence along with the performance of the different kind of variables that is macroeconomic in nature. It is the feature of the data wherein it has been seen that the rate of average inflation control the entire economy and it is lower in nature before and after the different kind of treatments of the law (Bodea and Higashijima 2017). Furthermore, it has been seen that increase in the real growth of the gross domestic product of the flexible kind of inflation rates is the remarkable kind of outcome. It has been seen that the magnitude of the effect of the central bank independence has helped in understanding that the other forces will help in contributing towards the increase in the growth of the real GDP (Fernndez-Albertos 2015). There are different kinds of curves that have different effects that will include analysis of the different kind of issues that will help in understanding such issues in an effectual manner. The different independence of the central bank has helped in understanding and analyzing that the high degree and level of central bank political along with legal kind of independence. It helps in analyzing the economic literature that helps in providing impact of the central bank independence in an effective manner. One of the different kinds of comprehensive studies has helped in understanding that there is a relationship between the inflation rate and central bank independence. It helps in confirming that there is negative kind of relationship between independence and inflation rate that has to be analyzed in an effectual manner. However, there are different kind of contributions that is required to be made in an effectual manner wherein it helps in understanding that the variability of the rate of interests wherein it is measured by understanding the remarkable differences in the rate of inflation and this will help in generating huge amount of differences in the outcomes of the inflation in an effective manner (Grkaynak et al. 2015). Lastly, it has been seen that the different kind of empirical data and results will help in understanding the relationship between the different inflation rate and central bank independence. The different kind of analysis has been done that has helped in understanding the relationship between the two factors and this will help in Research Methodology The research methodology of a paper consists of the different techniques which are generally used by a researcher in order to carry out the study in connection to the given topic. Research methodology can be defined as the process by which the study in regard to a paper is conducted in a systematic manner. It helps to carry out the research in a systematic manner. Types of Investigation: There exist three types of investigation which are as follows. Exploratory- This is adopted in a situation where the researcher does not possess a clear idea of the concerned topic. Descriptivethe descriptive manner is adopted when there are a vast number of theories and concepts available for the given topic. Hypothesis- This method is used whereby a hypothesis is developed which is based on the research in order to determine the validity of the hypothesis. Justification of the type of Investigation chosen: For this research, the hypothesis research study will be used whereby an econometric model which will be designed using secondary data and the relationship between the CBI reforms and inflation in the various parts of the world will be tested in order to find out whether there exists a negative correlation between the two factors. When a research has to be conducted, especially in the domain of Finance, a database is required. The data which will be collected will be done using secondary data. In secondary data, the given data is usually collected from secondary sources like books, articles and journals. In a primary data collection, the data is collected using various surveys and interview processes. Justification of the Data Collection Method Chosen: In this research, the secondary data collection method will be used whereby the researcher will be collecting data from various articles and sources. Data set from 130 countries will be used from a period of 1990-2017. Correlation and regression will be performed on the given data set with the help of which the objective will be completed. Accessibility Issues: While the research is being conducted, the researcher might face certain problems related to the data set which is required for the research. He may not be able to identify the appropriate data required for the hypothesis. Ethical Issues: While the research will be conducted, the ethicality needs to be maintained in all aspects. As per the Data Protection Act, 1998, while a researcher is conducting the research, the privacy of data needs to be maintained strictly. In a scenario if the researcher fails in maintaining the ethicality then, he shall be held liable for breaching. Data Analysis Plan: Data analysis plan is of two types, namely, Quantitative Data Analysis Qualitative Data Analysis For the given research, the researcher shall be relying on the quantitative data analysis. In this analysis, the outcomes and procedures will be attempted on the data set collected from 130 banks from a period 1990-2017. The reason why this method will be chosen is because, the topic requires hypothetical testing which is only possible using data. If there exists a relationship between the central bank`s independence and the inflation rate then the null hypothesis will be rejected else it will be accepted. Research Limitations: The limitations that will be faced by the researcher will be the limitations with regard to the data which will be collected for the given subject. Time and budget are the two primary limitations Structure of the Proposed Dissertation: The given dissertation paper shall comprise of five primary chapters. The first chapter will be throwing light on the background of the study which will consist of the aims and objectives of the given research. The second chapter will consist of the; literature review whereby the relevant theories and the concepts related shall be discussed. The third chapter will be a reflection of the methodology of the data used for the research, sources of secondary data and data analysis technique. The fourth chapter shall analyze the secondary data using correlation and regression whereby the hypothesis will be proved. The final chapter shall comprise of a conclusion and state certain recommendations for the research. Time Horizon (Gantt chart) Activity Days(March-April) 1-8th March 10-15th March 16-18th March 19-22nd March 23-26th March 27th March- 04th April 5- 8th April Finalizing the research topic Collecting data from the secondary sources layout of the research work Literature review Formation of the research plan Selecting appropriate research methodologies Collection of datafrom primary sources Analyzing the data sets Interpretation of collected data sets Concluding the Study Designing of rough draft Submitting the Final Work Table 3.1: Time Line of Research (Source: Created by the author) From the timeline of the entire research, it can be analyzed that there are different kind of tasks that has to be completed effectively on time and this will help in solving and finishing the entire task within the specified deadline. There can be different hurdles in completing the task that has to be properly initiated and taken into action to complete the tasks effectively. The submission of the final task will help in understanding the different gaps or loopholes in the task that will help in understanding the requirement of different strategies that can solve the task in an effectual manner. References Blancheton, B., 2016. Central bank independence in a historical perspective. Myth, lessons and a new model.Economic Modelling,52, pp.101-107. Bodea, C. and Hicks, R., 2015. Price stability and central bank independence: Discipline, credibility, and democratic institutions.International Organization,69(1), pp.35-61. Bodea, C. and Higashijima, M., 2017. Central Bank Independence and Fiscal Policy: Can the Central Bank Restrain Deficit Spending?.British Journal of Political Science,47(1), pp.47-70. Bodea, C. and Higashijima, M., 2017. Central Bank Independence and Fiscal Policy: Can the Central Bank Restrain Deficit Spending?.British Journal of Political Science,47(1), pp.47-70. Bodenstein, M., Erceg, C.J. and Guerrieri, L., 2017. The effects of foreign shocks when interest rates are at zero.Canadian Journal of Economics/Revue canadienned'conomique,50(3), pp.660-684. De Haan, J. and Eijffinger, S.C., 2016. The politics of central bank independence. (De Haan and Eijffinger 2016) Doumpos, M., Gaganis, C. and Pasiouras, F., 2015. Central bank independence, financial supervision structure and bank soundness: An empirical analysis around the crisis.Journal of Banking Finance,61, pp.S69-S83. Edwards, S., 2015. Monetary policy independence under flexible exchange rates: an illusion?.The World Economy,38(5), pp.773-787. Fernndez-Albertos, J., 2015. The politics of Central Bank independence.Annual Review of Political Science,18, pp.217-237. Fernndez-Albertos, J., 2015. The politics of Central Bank independence.Annual Review of Political Science,18, pp.217-237. Garriga, A.C., 2016. Central bank independence in the world: A new data set.International Interactions,42(5), pp.849-868. Grkaynak, R.S., Kantur, Z., Ta?, M.A. and Y?ld?r?m, S., 2015. Monetary policy in Turkey after Central Bank independence. Grkaynak, R.S., Kantur, Z., Ta?, M.A. and Y?ld?r?m, S., 2015. Monetary policy in Turkey after Central Bank independence. Masciandaro, D. and Romelli, D., 2015. Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics.Financial History Review,22(3), pp.259-289. Neuenkirch, M. and Neumeier, F., 2015. Party affiliation rather than former occupation: The background of central bank governors and its effect on monetary policy.Applied Economics Letters,22(17), pp.1424-1429. Reis, R., 2015. Comment on:When does a central banks balance sheet require fiscal support? by Marco Del Negro and Christopher A. Sims.Journal of Monetary Economics,73, pp.20-25. Rey, H., 2015.Dilemma not trilemma: the global financial cycle and monetary policy independence(No. w21162). National Bureau of Economic Research. Sims, C.A., 2016, August. Fiscal policy, monetary policy and central bank independence. InKansas Citi Fed Jackson Hole Conference.