The effect of central bank independence on financial stability in developed countries: evidence from the Fourier procedure

Abstract

In this study, it is analysed whether central bank independence or real effective exchange rate, international reserves, credits, and current account deficit are effective on financial stability in 9 developed countries between the period of 1996-2017. The Fourier procedure is applied for analysis. As a result of the analysis, it is concluded that central bank independence is not effective on financial stability. Also, it is determined that credit volume negatively affects financial stability while international reserves positively affect it.

Keywords

• central bank independence
• financial stability
• cwn index
• z-score
• fourier methodology