Exploring central bank independence: inferences from country clusters

Abstract

This study explores the complex and multifaceted nature of central bank independence (CBI) at the country level, highlighting both similarities and differences. The investigation centers on the k-prototypes clustering algorithm, which effectively captures the complexities of CBI by incorporating both numerical and categorical data related to financial stability and governance dynamics. The clustering results offer valuable insights into how countries compare in terms of the trade-offs imposed by central bank policies and their economic and governance outcomes. The comparative analysis of country clusters, as well as the countries within each cluster, provides essential information for identifying leading examples of CBI.