Legal Origins, Central Bank Independence and Inflation Stability: Institutional Determinants of Sustainable Monetary Policy

Анотація

This paper examines whether legal origins influence the anti-inflationary effectiveness of central banks. While prior literature emphasizes the role of institutional frameworks in shaping financial systems, less attention has been paid to how legal traditions affect the relationship between central bank independence and inflation stability. Using a distance-to-frontier approach, we construct a gap measure between central bank independence and inflation performance. The results indicate that countries with a common law origin exhibit a significantly larger negative gap, suggesting higher anti-inflationary effectiveness despite lower formal central bank independence. In contrast, civil law countries tend to rely more heavily on formal institutional strengthening to achieve comparable inflation outcomes. Regression analysis confirms that the common law proxy remains statistically significant across most model specifications and demonstrates stronger explanatory power than traditional governance indicators such as the rule of law.

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