In the aftermath of the Global Financial Crisis (GFC), 'financial stability' emerged as one of the key pillars of economic policy-making and as a new mandate for central banks. In spite of the acceptance and prominence of financial stability goal, we know very little about the mechanisms of institutional change and the role of institutional entrepreneurship in particular, to pursue financial stability objective in national contexts. This study investigates the active financial stability pursuit of the Central Bank of the Republic of Turkey (CBRT) following the GFC and argues that institutional entrepreneurship of CBRT as an organisation and the governor of CBRT as an individual paved the way for active financial stability pursuit and resulting institutional and policy changes in Turkey by accomplishing 'organisational learning' at the CBRT. Governor of CBRT also played a key role as an institutional entrepreneur by gaining Turkish Treasury's political support in design of unconventional monetary policy measures for financial stability objective. Utilising institutional theory, organisation theory, and public policy literature, this study offers an interdisciplinary, agency based and process-oriented analysis to the study of the political economy of central banking in the aftermath of GFC and sheds light on the questions of why and how central banks take specific policy decisions from a micro-level analysis.
The predominance of technocracy and preference for institutional independence that was key to the market-state relationship since the end of the cold-war is being challenged by renewed calls for re-politicisation from across the political spectrum. The prime examples in developed economies are President Trump in the USA and the Labour Party leadership under Jeremy Corbyn in Britain. Re-politicisation points to a different, state-centric, model of accountability and legitimacy for the operation of institutions. This chapter examines calls for a return to politicalinstitutional environments long extinct in the west, and (up until recently) in retreat in the developing world. The chapter argues that the contemporary critique of central bank independence has nothing to do with the literature on empowerment and greater accountability that was developed at the time of (and since) the financial crisis; and reflects on a metamorphosis of debates towards undemocratic, capricious, populist and state-centric directions. This phenomenon has profound implications for emerging economies where efforts to build a pro-market institutional and legal framework have long focused on the promotion of independent institutions, like central banks. The chapter argues that these developments in the political centres of the west directly undermine modernising efforts in emerging economies.
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