Using neural networks to assess the impact of institutional arrangements on economic outcomes: Inflation and the separation of monetary policy from banking supervision

This paper uses a competitive neural network model to examine whether the separation of monetary policy and banking supervision has an impact on inflation. Our results show that countries with similar organizations of banking supervision and monetary policy indeed have similar levels of inflation. In addition we find that both the average rate and volatility of inflation are lower in countries where the Central Bank, which conducts monetary policy, does not supervise the stability of the banking system.