Central Bank Independence and Monetary Policy Effectiveness in the Middle East, Central Asia and Caucasus

The subject of central bank independence (CBI) remains a keenly debated topic even decades into its adoption in a growing number of countries. CBI has recently come under renewed scrutiny, including in the Middle East and Central Asia (ME&CA) countries, as pressures for monetary policy to accommodate fiscal needs have intensified. To better inform the debate around CBI, this paper provides the first comprehensive analysis of its role in managing inflation including when subject to shocks, a key indicator on the effectiveness of monetary policies, in ME&CA countries using a novel data set and country deep dives. It further identifies institutional strengths and weaknesses of CBI in ME&CA countries and offers tailored policy recommendations to strengthen CBI.