Effects of Central Bank independence on price stability: Case of Turkey (1980-2018)

The inflationary process that emerged after the oil crisis in 1970s reveals the idea of the independence of central banks ensuring the price stability and leads to the steps towards the independence of central banks around the world. In this context, some regulations have been put into effect to ensure the independence of central bank and to ensure price stability and avoid the uncertaintry created by the inflation in Turkey's economy in parallel with the progress towards the independence of central banks around the world. Starting from this point, in this study, the effects of independence of Turkish Republic Central Bank (TRCB) on price stability have been examined with time series analysis using quarterly data of 1980-2018 periods. As a result of this study, the independence of Turkish Republic Central Bank (TRCB) has been observed to have an important effect over price stability in line with the theoretical and empirical literatures. These results point to the fact that the policy makers should increase the independence level of TRCB and/or maintain the current level of independency of the bank by making legal arrangements in order to ensure and maintain the price stability in Turkey's economy.