THE RELATIONSHIP BETWEEN CENTRAL BANK INDEPENDENCE, FINANCIAL FREEDOM, AND ECONOMIC GROWTH: A PANEL ARDL BOUNDS TESTING APPROACH

Abstract

The purpose of this study is to investigate the nexus between central bank independence, financial freedom, and economic growth in EU member countries from 1995 to 2011 by employing panel ARDL bounds testing approach. The results suggest that there is a positive and statistically significant evidence between central bank independence, financial freedom, and economic growth in both long and short-term. Besides, long-term empirical results refer that current period central bank independence and financial freedom are the important factors for determining the national output level. In addition, the results of the short-term dynamics are parallel with the long-term estimation results.