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A random forests approach to assess determinants of central bank independence

Journal of Modern Applied Statistical Methods, ISSN: 1538-9472, Vol: 17, Issue: 2
2018
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Article Description

A non-parametric efficient statistical method, Random Forests, is implemented for the selection of the determinants of Central Bank Independence (CBI) among a large database of economic, political, and institutional variables for OECD countries. It permits ranking all the determinants based on their importance in respect to the CBI and does not impose a priori assumptions on potential nonlinear relationships in the data. Collinearity issues are resolved, because correlated variables can be simultaneously considered.

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