Central Bank Independence and Its Impact on Macroeconomic Stability

Abstract

This study investigates the relationship between central bank independence (CBI) and macroeconomic stability, focusing on whether and how independent central banks contribute to better inflation control, fiscal discipline, and overall economic resilience. Amid increasing global economic uncertainty and expanding central bank mandates, the article aims to clarify the continuing relevance of CBI in both developed and developing contexts. Using a systematic literature review of peer-reviewed studies, this research synthesizes empirical findings across various institutional and macroeconomic settings. The analysis reveals that CBI is strongly associated with lower inflation rates and improved fiscal discipline, particularly in countries with strong legal frameworks and institutional enforcement. However, the review also finds that formal legal independence does not always translate into real autonomy, especially in weaker governance environments. The discussion highlights how central bank effectiveness depends not only on legal status but also on political context, transparency, and broader economic coordination especially in times of crisis. Overall, the study concludes that while CBI remains a critical factor in macroeconomic stability, its success increasingly relies on institutional credibility and adaptability in an evolving global landscape