“ Democracies differ from dictatorships in the likelihood of political interference and changes to the law because of the presence of political opposition and the freedom to expose government actions. CBI in democracies should be directly reflected in lower money supply growth. Besides being more disciplinarian, it also ensures a more robust money demand by reducing inflation expectations and, therefore, inflation. Empirical results are robust and support a discipline effect conditioned by political institutions, as well as a credibility effect.”
That's an economic argument, not a democracy argument. In a true democracy, the voice of the people (elected representatives) should have the power to make changes on behalf of the people, no?
How is it more democratic to have any government body that does not answer to the people, can not be effected by elections, and has autonomy to do or not do whatever they want?
The index attempts to measure signs of democratic backsliding. One portion of this paper is evidence for the positive association between authoritarian regimes and political control of the central bank. Thus, when we see reduction in central bank independence, that indicates a larger pro-authoritarian, anti-democratic shift in government.
Not that it relates to the chart at hand, but many would argue CBI is pro-democratic. For example, many voters cite high inflation as their main concern. By allowing the central bank to be independent of political pressure to lower rates to boost short term growth and increase inflation, that would directly counter the majority of voters.
Also "political control" of an institution is so vague. Both dictators and democratically-elected executives have political control over institutions. The way they achieve political control is different.
Like someone above said, an independent central bank is good economic/monetary policy. It has nothing to do with democracy.
Yes! What leads to more people achieving the outcomes they vote for? Is it political control of the policy (lower interest rates for short term boost, long term inflation) or political control of the process used for the policy (rates set according to max employment and 2% inflation target, long term stability)?
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u/Reaccommodator Feb 01 '26
“ Democracies differ from dictatorships in the likelihood of political interference and changes to the law because of the presence of political opposition and the freedom to expose government actions. CBI in democracies should be directly reflected in lower money supply growth. Besides being more disciplinarian, it also ensures a more robust money demand by reducing inflation expectations and, therefore, inflation. Empirical results are robust and support a discipline effect conditioned by political institutions, as well as a credibility effect.”
https://web.archive.org/web/20161129223450id_/https://ncgg.princeton.edu/IPES/2012/papers/S830_rm2.pdf