Monetary Institutions and the Political Survival of Democratic Leaders

Abstract

Clark, William R., Sona N. Golder, and Paul Poast. (2012) Monetary Institutions and the Political Survival of Democratic Leaders. International Studies Quarterly, doi: 10.1111/isqu.12013 © 2012 International Studies Association According to the political business cycle literature, survival‐maximizing leaders will manipulate whatever macroeconomic policy instruments they have at their disposal in order to retain power. However, an obvious implication of the political business cycle literature has not previously been adequately tested: does having the ability to manipulate macroeconomic policy instruments actually allow leaders to stay in office longer? We argue that elected leaders who have neither fiscal nor monetary instruments available for electoral purposes will find it more difficult to survive in office. We test this claim using data from 19 OECD countries in the latter part of the twentieth century when the degree of capital mobility in the international economy was high. We find that access to macroeconomic instruments does help leaders retain office, but that these instruments are only effective for leaders who have been in office for at least 7 years.

Borrowed Time: Sovereign Finance, Regime Type, and Leader Survival

“…First, there is a growing literature demonstrating that external and internal sources of non‐tax revenue have a substantial effect on political survival (Smith, ; Kono and Montinola, ; Licht, ; Bueno de Mesquita and Smith, ; Williams, ; Ahmed, ). Our results and argument also speak to a related literature that examines the impact of various policy tools on government survival (Clark et al., ; Hollyer and Rosendorff, ). Future research may also want to consider the role of sovereign credit in related outcomes like regime stability and democratization as existing research demonstrates that external economic shocks and other forms of non‐tax revenue play a non‐trivial role in regime transitions (Haggard and Kaufman, ; Morrison, ; van de Walle, ; Wright, ).…”

“…More specifically, the data do not sufficiently distinguish departures resulting from political and non‐political factors. As a result, others have attempted to append the ARCHIGOS data to address this shortcoming by identifying departures from office that likely stem from non‐political sources (Clark et al., ; Crespo‐Tenorio et al., ; Licht, ).…”

Central Bank Independence in the World: A New Data Set

“…Many studies show the stabilizing effects of CBI on the economy: CBI is linked to lower inflation, reduced variation in inflation and output, increased credibility of the monetary policy, and lower uncertainty among economic agents (e.g., Bodea and Hicks 2015a, Cukierman 1992, Cukierman, Miller, and Neyapti 2002, Cukierman, Webb, and Neyapti 1992, Persson and Tabellini 1990, Rogoff 1985. The literature also shows that CBI has important political consequences (e.g., Bernhard andLeblang 2002, Clark, Golder, andPoast 2013).…”

Central banks and civil war termination

“…Extensive research shows that central bank independence has significant economic and political consequences, ranging from inflation control or economic growth (Cukierman, 1992; Alesina & Summers, 1993; Bodea & Hicks, 2015a; Garriga & Rodriguez, 2020) to fiscal spending, regime survival, cabinet stability, and even international wars’ dynamics (Broz, 1998; Clark, Golder & Poast, 2013; Poast, 2015; Bodea & Higashijima, 2017; Bodea, Garriga & Higashijima, 2019). Recent work shows robust effects of central bank independence on inflation both in democracies and autocracies (Garriga & Rodriguez, 2020), and on credit markets (Bodea & Hicks, 2015b, 2018).…”