Central Bank Independence and Inflation IN EU-28

Today, both policymakers and academicians consider that the central bank’s main goal is to guarantee price stability. The central bank can sustain the government’s economic policies, but only without prejudicing this objective. In order to focus on price stability several studies found that central bank should have a high level of independence. This is why during the recent decades the majority of developed countries, but also several emerging economies have employed institutional reforms that conferred their monetary authorities – the central bank – more independence.

Within the European Union the central bank independence is a crucial issue, since the Maastricht Treaty stipulates that one requirement for joining Economic and Monetary Union for the candidate member states is to give their central banks a sufficiently high level of independence. This official requirement has encouraged the countries from Centre and East Europe engaged on the way to adhere the Economic and Monetary Union to confer their central bank a great level of independence.

In this paper we analyze some important theoretic issues about central bank independence. We also make an empirical investigation regarding the evolution of inflation within European Union relative to the independence of member states’ central banks.