Developing a Network Theory-Based Tool to Assess Central Bank Policy Effectiveness

Abstract

Aim of the Study: The paper aimed to create a mathematical tool that would aid economists in predicting the effectiveness of central banks in different countries.

Methodology: This study adopted an organized methodology starting with the specification of necessary parameters to be incorporated in the final equation. Country cases were provided for each variable and their significance was discussed and illustrated. Variables were then quantified and assigned a value between 0 and 1, with their mean calculated to provide a simplified representation of the overall impact. This approach helped in reaching a structured and clear conclusion with relation to the selected variables.

Findings/Results: The study proposed a new analytical tool that clearly linked various factors, including political stability, the informal economy, and Social and Religious attitudes, and their relationship with monetary policy outcomes. The tool could also predict the future possibilities regarding interest change in any country to favor its decision.

Conclusion: This study introduced a novel network theory-based quantitative tool to evaluate the effectiveness of central bank monetary policies globally. With features like the political stability index, the size of the informal economy, and social/religious acceptability of policies, the tool gave firm comprehensive benchmarks for the outcomes of policies. According to the observations made during this work, these and other variables depend on central bank effectiveness, as a quantitative analysis of various examples proved.