The Effect of Transparency (Information) and Independence of Central Bank on Productivity Growth in Iran

This study has investigated the effect of transparency and independence of Central Banks on productivity growth during 1981–2018 in Iranian economy. Transparency and independence of central bank were measured by Dincer and Eichengreen (2012) index and Cukierman (1993) index respectively. The variables in this study which are in annual form are central bank transparency, central bank independence, GDP growth, productivity growth, inflation rate and free trade. Auto Regressive Distributed Lag (ARDL) method used for model estimation. The coefficient of the error term is negative, statistically significant and equal to -0.308. It concluded that 30% of the disequilibrium in the short-run is adjusted to achieve long run equilibrium. The results show that the transparency of the central bank has a positive effect and the coefficient is equal to 0.36 on the short-run productivity growth, but it is effective on the long-run productivity growth equal to 1.08. In this study, Cukierman and et al. (1992) index used to calculate central bank independence. In addition, Dincer Eichengreen’s (2012) index was used for the transparency index. Considering the positive impact of central bank transparency on productivity growth, the central bank should continuously promote policy transparency and dissemination of received information of macroeconomic variables during a month.