Journal of Political Institutions and Political Economy > Vol 5 > Issue 3

The Politics of Reversing Central Bank Independence

Andreas Kern, McCourt School of Public Policy, Georgetown University, USA, ak679@georgetown.edu , Jack Seddon, Faculty of Political Science and Economics, Waseda University, Japan, jseddon@waseda.jp
 
Suggested Citation
Andreas Kern and Jack Seddon (2024), "The Politics of Reversing Central Bank Independence", Journal of Political Institutions and Political Economy: Vol. 5: No. 3, pp 443-485. http://dx.doi.org/10.1561/113.00000108

Publication Date: 27 Nov 2024
© 2024 A. Kern and J. Seddon
 
Subjects
Public economics,  Comparative political economy,  International political economy,  International relations,  Political economy,  Public administration,  Public policy
 
Keywords
International political economypolitical economy of central bankingcentral bank independencesovereign debtReichsbank
 

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In this article:
Introduction 
Existing Theories of Central Bank Independence 
Argument in Brief: Power Politics and CBI Reversals 
Theoretical Framework 
The Case Study of the Reichsbank 
Concluding Remarks 
References 

Abstract

The recent confluence of populism, nationalism, and mounting debt has put central banks under political pressure. When and how do governments succeed in politically subordinating central banks? To answer these questions, we derive a novel macro-historical theoretical perspective on the making and unmaking of the political independence of central banks. Complementing new domestic political-conflict perspectives on central banking, we argue that central bank independence (CBI)—splitting central banks from governments—is designed foremost to protect international sovereign lenders. However, under certain conditions, politicians can weaponize central banks against creditors. Tracing the rise and fall of CBI in interwar Germany, we demonstrate how the Reichsbank was used by international lenders to control the Weimar Republic and later by the Nazi regime to expropriate those same creditors.

DOI:10.1561/113.00000108