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Impact of central bank independence and transparency on international equity portfolio allocation: A cross-country analysis

Kwabi, Frank O.; Boateng, Agyenim; Du, Min


Frank O. Kwabi

Agyenim Boateng


In this study, we analyse the effects of central bank independence (CBI) and central bank transparency (CBT) and their interactions with institutional quality on foreign equity portfolio inflows. Employing a dataset from 42 countries over the period from 2001 to 2014, we find strong evidence that independent and transparent central bank has a positive and significant influence on foreign equity investment inflows. Further analysis shows that institutional quality interacts with central bank independence and transparency in attracting foreign equity portfolio. Our results are robust to alternative specifications, endogeneity concerns and that economic policy uncertainty increases asymmetric information and deters foreign equity portfolio investment inflows.

Journal Article Type Article
Acceptance Date Feb 24, 2020
Online Publication Date Feb 27, 2020
Publication Date 2020-05
Deposit Date Dec 10, 2021
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 69
Article Number 101464
Keywords Central bank independence, Central bank transparency, Economic policy uncertainty, Foreign equity portfolio flow, Institutional quality
Public URL