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Inflation volatility in Tunisia depends on fiscal coordination and transparency

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Three professional business people in business attire sit at a table in a modern office setting, reviewing documents and using laptops together in what appears to be a collaborative meeting or discussion.
Research area:MacroeconomicsMonetary Policy and Economic ImpactFiscal policy

What the study found

The study finds that central bank independence (CBI, the degree to which a central bank can make decisions without political control) by itself does not significantly reduce inflation volatility in Tunisia. It also reports that legal independence can slightly increase inflation fluctuations in one binary measure, while greater CBI under fiscal pressure reduces volatility.

Why the authors say this matters

The authors conclude that legal independence alone is not enough without fiscal discipline or coordination between monetary and fiscal authorities. They also suggest that economic transparency and a coherent macroeconomic framework matter for inflation stability.

What the researchers tested

The study examined determinants of inflation volatility in Tunisia, focusing on CBI, economic transparency, and macroeconomic fundamentals. It combined a game-theory framework with a binary threshold nonlinear autoregressive distributed lag model (NARDL, a way to examine long-run relationships that may differ across regimes) and a Markov-switching GARCH model (MS-GARCH, a method for tracking changing volatility over time).

What worked and what didn't

As a continuous measure, CBI had no significant impact on 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 stabilized inflation when backed by credible fiscal signals.

What to keep in mind

The findings are based on Tunisia and may not apply in the same way elsewhere. The abstract does not provide sample dates or other detailed limitations, so only the scope and methods stated in the summary can be reported here.

Key points

  • Central bank independence alone was not significantly linked to lower inflation volatility when measured continuously.
  • High legal independence slightly increased inflation fluctuations in one binary specification.
  • Under fiscal pressure, greater central bank independence reduced inflation volatility.
  • Economic transparency tended to raise short-term volatility but helped stabilize 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:
Inflation volatility in Tunisia depends on fiscal coordination and transparency
Authors:
Emna Trabelsi
Institutions:
Higher Institute of Management, University of Sousse
Publication date:
2026-01-27
DOI:
10.3390/economies14020039
OpenAlex record:
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AI provenance: This post was generated by gpt-5.4-mini (OpenAI). The original authors did not write or review this post.