(iPoster) Endogenous Central Bank Reform in Autocracies

• In Event: Poster Sessions: Foundations of Political Theory II & Autocratic Politics and Democracy
  In Poster Session: Poster Session: Autocratic Politics and Democracy

Abstract

Existing studies suggest that autocracies with a higher degree of Central Bank Independence (CBI) perform relatively better in managing inflation compared to their peers. Even when the CBI does not contribute to mitigate inflation, the question remains as to why this reform was implemented in the first place in autocracies. The current literature predominantly attributes the reform to external pressures, yet its domestic origins remain largely unexplained. Building upon literature on authoritarian politics and bargaining theory, I demonstrate that the level of CBI across autocracies is an equilibrium consequence of the internal power struggle between the dictator and their ruling coalition. I argue that the dictator introduces the CBI as a strategic initiative to expand their personal power from an initially weak bargaining position. I show that dictators personalize their regime through the reform when their ruling elite coalition is capable of collective action, but personalizing by weakening this monetary institution when their ruling coalition is fragmented. I corroborate this claim and its mechanism on a sample of autocracies in the post-war global economy. Cross-validation through parameteric and semiparameteric inferences on this sample yields supportive evidence on this counterfactual claim. Multiple validation checks also show that this empirical finding is robust.

Author

• Syamsul Bahri, University of Michigan