Impacts of Authoritarian Policies on Central Banks’ Credibility and Functionality: Evidence from Turkey
31 Pages Posted: 5 Sep 2021 Last revised: 19 Oct 2021
Date Written: August 16, 2021
This paper documents the political interference with the monetary policy and governance of the Central Bank of the Republic of Turkey (CBRT). Converting textual governor biographies into quantitative data, the study develops professional qualification profiles (PQPs) and compares Turkey’s governors with their peers in the G20. The findings indicate that the PQPs of the latest CBRT governors are drastically below the average PQP of the current G20 governors. The results also manifest a downward slope for the PQP trend line of the CBRT governors in 2001-2021 as aggravating authoritarian policies drive out the rule of law and usher in higher governor turnover rates in Turkey. The CBRT’s increasing governor turnover rates spiral ambiguity, deteriorate its credibility, undermine its functionality, and propel the monetary policy into a vicious circle. The findings of the study provide vital takeaways for Turkey and the countries facing an exacerbating trend of the rule of law.
Keywords: The rule of law, monetary policy, central bank, G20, Turkey
JEL Classification: E02, E42, E52, E58, E61
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