Analyzing the Impact of Central Bank Independence on Its Credibility and Reputation in Afghanistan

This study aims to examine the impact of central bank independence on the credibility and reputation of the institution in the Islamic Republic of Afghanistan over the period 2002–2023. The research undertakes a comprehensive assessment of various dimensions of institutional independence, including the reduction of political interference, the enhancement of transparency, and the strengthening of the capacity to implement sound and sustainable monetary policies. The methodological framework is based on an Autoregressive Distributed Lag (ARDL) model, employing time-series data analysis. The findings indicate that central bank independence exerts a positive and statistically significant effect on both its credibility and reputation. Moreover, exchange rate volatility is found to have a negative and significant impact on these variables, whereas economic growth and inflation control serve as complementary factors that play a pivotal role in enhancing the central bank’s credibility and reputation. These results can inform economic policy-making aimed at reinforcing the position of the central bank at both national and international levels. Key Words: Central Bank Independence, Central Bank Credibility, Economic Stability, Monetary Policy, Exchange Rate Volatility