The impact of Central Bank independence on price stability: Does independence lead to lower fiscal deficits?
Introduction An independent central bank has significant impacts on the rate of inflation, price stability, and fiscal deficit. In the democracies with independent central banks, the fiscal balance is more stable compared to the countries with non-neutral central banks. Other than the central banks, it is essential to understand there are external factors that could affect fiscal balance. For instance, election years, budget statements, media freedom and the executives have a significant influence on the fiscal stability. Thus, the research will analyze reports and documents to internalize the impacts on the independent central banks on the fiscal balance. The impact of Central Bank independence on price stability: Does independence lead to lower fiscal deficits? Research Questions The research on the impact on the independence of central banks on the fiscal deficit will be based on three primary questions. They include; What factors affect the effectiveness of independent central banks in creating fiscal balance? Do independent central banks lower the fiscal deficit in all democracies? What is the impact of government budget statement on the fiscal balance in economies with independent central banks? The Significance of the Study The findings of the research will improve the role of the central bank ensuring economic growth across the world. The research will also provide insights on future studies focusing on the central bank as a tool of economic development in less developing nations. Literature…
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