What the study found
The study finds that central bank independence (CBI) by itself has no significant effect on inflation volatility in Tunisia when measured continuously. It also finds that higher legal independence can slightly increase inflation fluctuations in a binary regime, while fiscal pressure and credible fiscal coordination change this pattern.
Why the authors say this matters
The authors conclude that legal independence alone is insufficient without fiscal discipline or coordination between monetary and fiscal authorities. They also suggest that economic transparency and a coherent macroeconomic framework matter for how well monetary institutions can support inflation stability.
What the researchers tested
The paper examines determinants of inflation volatility in Tunisia, focusing on central bank independence, economic transparency, and macroeconomic fundamentals. The authors first develop a game-theory-based theoretical framework and then apply a binary threshold nonlinear autoregressive distributed lag (NARDL) model and a Markov-switching GARCH (MS-GARCH) model to study long-run relationships and volatility dynamics.
What worked and what didn't
As a continuous measure, CBI was not significantly related to volatility. In a binary regime, high de jure independence was associated with a slight increase in inflation fluctuations, but under fiscal pressure greater CBI substantially reduced inflation volatility. Economic transparency generally increased short-term volatility but helped stabilize inflation when supported by credible fiscal signals.
What to keep in mind
The abstract does not describe the full data period, sample details, or additional robustness checks. The results are specific to Tunisia and to the methods and variables named in the abstract.
Key points
- Central bank independence alone had no significant effect on inflation volatility when measured continuously.
- High legal independence in a binary regime was linked to a slight increase in inflation fluctuations.
- Under fiscal pressure, greater central bank independence substantially reduced inflation volatility.
- Economic transparency generally raised short-term volatility but stabilized inflation with credible fiscal signals.
- Broad money volatility was strongly destabilizing, while industrial production and the real exchange rate were largely insignificant.
Disclosure
- Research title:
- Tunisia study links inflation volatility to fiscal coordination and transparency
- Authors:
- Emna Trabelsi
- Institutions:
- Higher Institute of Management, University of Sousse
- Publication date:
- 2026-01-27
- OpenAlex record:
- View
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