Anton Marci

The stable functioning of the public finance system requires a rational regulatory apparatus. The central bank occupies a special place in this system. Science and practice prove that the central bank’s political and economic independence determines its effectiveness. Thus, it is crucial to determine the prerequisites for ensuring its independence. The study aims to assess the influence of governance quality on the central bank’s independence, considering the variance of the socio-political development of countries. The analysis was conducted based on 53 countries. Panel regression modeling with random effects was chosen as a research method. The analysis approach involves calculations for the groups of countries that differ in social and political development parameters according to the following criteria: the initial level of the central bank independence; level of human development; political rights freedom; level of civil liberties; and political regime.
Socio-political factors significantly affect the central bank’s independence in the following conditions: a high initial level of independence of the central bank, a high level of human development, and an average level of political and civil freedom. At the same time, the governance quality ensures the growth of the central bank’s independence regardless of the countries’ political regime. Three factors have the most significant influence on ensuring the independence of the central bank, namely “government efficiency,” “quality of regulation,” and “rule of law.”

Type of the article: Research Article

Abstract
The COVID-19 pandemic, the energy and inflation shock, and the Russian–Ukrainian war have challenged macroeconomic stability in European countries while exposing the limitations of traditional, single-indicator assessments. This study aims to analyze the evolution and structural drivers of macroeconomic stability across successive crisis regimes in European countries by applying a pentagon-based composite index that captures the joint interactions among growth, inflation, fiscal balance, labor-market conditions, and external positions. The empirical analysis is based on annual macroeconomic data for European countries over 2019–2024 and employs policy-consistent distance-to-target normalization combined with a non-additive pentagon-area aggregation method. The results indicate that macroeconomic stability was relatively high before the shocks, with an average index value of approximately 0.61 in 2019, reflecting broadly balanced macroeconomic conditions. In 2020, stability collapsed to an average of about 0.15, driven primarily by the near-universal contraction in GDP growth and the deterioration of fiscal balances. A partial recovery followed in 2021, when the average index increased to around 0.35, but persistent fiscal imbalances prevented a full return to pre-crisis stability. In 2022, macroeconomic stability deteriorated again, with the average index falling to roughly 0.21 as inflation moved far outside the tolerance corridor in more than 90%. The subsequent period was characterized by heterogeneous and incomplete adjustment. By 2024, overall stability improved to an average of approximately 0.41 following the normalization of inflation. However, countries with chronic fiscal and external imbalances continued to exhibit low levels of stability, underscoring the non-compensatory nature of macroeconomic stability.

Acknowledgment
This study was conducted within the framework of the MSCA4Ukraine project 06030419, funded by the European Union. Views and opinions expressed are, however, those of the author(s) only and do not necessarily reflect those of the European Union, the European Research Executive Agency or the MSCA4Ukraine Consortium. Neither the European Union, the European Research Executive Agency, nor the MSCA4Ukraine Consortium, nor any individual member institution of the MSCA4Ukraine Consortium can be held responsible for them. The publication of this paper was funded by EKA University of Applied Sciences (Latvia) and Daugavpils University (Latvia).