Choosing coalition partners: the politics of central bank independence in Korea and Taiwan
This study is to explain why Taiwan’s elites delegate the independent authority of financial and monetary management to central bankers which resulted in survival of the Asian crisis, while Korean political leadership did not do so and the economy faltered in the crisis? My arguments are 1) if politicians choose capital-intensive industry and/or organized labor as their major coalition partners, they will not allow central bankers to have an independent authority; 2) if politicians choose other groups as their coalition partners (i.e., commercial banks, agriculture, and/or small-medium sized enterprises), they will be more likely to provide central bankers with independent authority. In addition to the two cases studies, I explore three Southeast Asian countries (Singapore, Malaysia, and Thailand). By employing statistical analyses to test the generalizability of my arguments in the context of developing countries, I confirm the hypotheses. Implications of my study include 1) the state needs to include subordinate social groups to counterbalance big bourgeoisie, especially in the globalization era; and 2) merely institutional or economic reform does not guarantee an independent central banking system; rather it is necessary to include heterogeneous social groups into the growth coalition to support effective central banking systems from below.