Effects of Central Bank Independence in Emerging Market Economies

<p>For the past three decades, Central Bank Independence has been widely accepted by the economics profession as a source of internal discipline on macro policy in order to counter the political pressures to follow excessively expansionary policies. Such policies tend to have favorable impacts on the economy in the short term, but over time, the benefits fade, and the main lasting result is higher inflation. The idea of Central Bank Independence is to have monetary policy be based on longer-run considerations than tend to dominate the political process in many countries. However, the recent rise of anti-globalism and populist sentiment, and several government leaders who appear to have little regard for the rule of law, have challenged the credibility of technocrats, including central bankers. In many countries, this has eroded public support for their independence. This study analyzes the effects of Central Bank Independence for a group of 32 Emerging Market Economies (EMEs) representing a diversity of geographic regions and income levels. It covers the years 1993- 2022. This is the period when many emerging economies began the process of industrialization, to reach middle-income levels, and increase their systemic presence and market access with the rest of the world. This dissertation analyzes how effective CBI is as a source of discipline on inflation under varying political institutional conditions, both as a single instrument and when it is combined with other polices such as the Exchange Rate Regime and Inflation Targeting. These are questions of particular interest because many central banks around the world have come under increasing attack in recent years, in some cases for overreaching their mandates and in others by powerful political actors wanting more expansionary monetary policies. To fight such pressure was the major reason that central banks were given independence. This study differs from much of the earlier research by using more recent years, which include the COVID-19 pandemic period and the post-pandemic resurgence of global inflation, which has served as a sharp reminder that macroeconomic discipline still matters, and inflation remains an important challenge for policymakers and central banks. I also take a more nuanced approach to my research by looking at the sub-components of Central Bank Independence, using both hard and adjustable pegs for the exchange rate regime, and looking at the effect of CBI in association with an inflation target.</p>

Name thesis:degree_name

Economics, PhD

Level thesis:degree_level

Restricted to Claremont Colleges Dissertation

Discipline thesis:degree_discipline

School of Social Science, Politics, and Evaluation

Year dc:date.available

2025

Author dc:creator

• Donaldson, Kim M.

Contributors dc:contributor

• Graham Bird
• Levan Efremidze

• Central Bank Independence
• Emerging Market Economies
• Exchange Rate Regimes
• Inflation Control
• Inflation Targeting
• Political Institutions
• Business Administration, Management, and Operations
• Economics

Repository record dc:identifier

https://scholarship.claremont.edu/cgu_etd/1079

OAI identifier oai:identifier

oai:scholarship.claremont.edu:cgu_etd-2100