The politics of central bank independence in Russia

Abstract

UNTIL THE EARLY 1990S little scholarly attention was devoted to the politics of central bank independence (CBI). Discussions of CBI focused on its desirability in terms of growth and inflation performance. Little thought was given to how central banks become (more) independent and how they maintain their independence once it is gained.1 Since 1991, however, much has been written on the political determinants of CBI.2 There is now a body of hypotheses and evidence against which to evaluate the emergence and maintenance of CBI in individual countries and in cross-national comparison. The aim of this article is to examine this issue specifically with reference to the Central Bank of Russia (TsBR). The TsBR presents an interesting case for several reasons. First, Russia is an economy in transition; the literature on the politics of CBI has been concerned primarily with developed market economies.3 Secondly, the TsBR is a new central bank, so its institutional position has been the focus of much debate. Finally, during 1992-93, the TsBR presented the astonishing spectacle of a highly independent, inflation-prone central bank at odds with a government committed to tight fiscal and monetary polices. Each of these factors has served to make the politics of central banking in Russia quite different from what has been found in studies of Western countries. The article begins with a brief discussion of the literature concerning the political aspects of CBI. This is followed by an analysis of the TsBR's position with respect to the various dimensions of CBI and a more general section assessing the political underpinnings of CBI in Russia.