International Comparison between Central Bank Independence and Political Regime Type

• Authors : Jin Seok Bae
• Journal : Journal of International Politics
• Publisher : Ilmin International Relations Institute
• Volume : 23(1)
• Publication Date : June, 2018
• Abstract : Does the Central Bank Independence (CBI) depend on the political regime type such as democracy and authoritarianism, or is the CBI determined by the economic situation of each country or the global economic trend regardless of the political regime type? Existing studies have their own limitations because they emphasize only the pressure of global financial reform by the Washington consensus or analyze just the political system of individual countries. This study argues that CBI is best assured when the pressure of global economic reform and the democracy of individual countries interact. For empirical analysis, this study used panel data from 182 countries from 1970 to 2012. The empirical analysis shows that, firstly, both the viewpoints of global financial reformby the Washington Consensus and of political regime type of individual countries have had significant influence. Second, as the core argument of this study, the CBI confirmed that the pressure of economic reform and the political regime work together. When the pressure of global financial reform by the Washington consensus was on the rise, it was matured democracies rather than others that still drove the development of CBI. Individual countries responded differently to the pressure of global economic reforms by their political regime type. Despite the theoretical concern that the conversion of the global financial system centered on the CBI could undermine democracy, this study shows empirical evidence that democratic influences exist as political agents in response to external environmental changes and pressures.