Globalization pressures and the state:: The worldwide spread of central bank independence

The authors examine the impact of globalization on state structures in the specific instance of the central bank. Following the world-system, world-society, and neoinstitutional perspectives in sociology, they assume that states are in cultural, political, and economic competition with each other, thereby seeking to maintain their position and status, frequently by adopting organizational forms or practices that make them isomorphic with their environment. The authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade, investment, and multilateral lending increases. They also model the cross-national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role-equivalent trade relationships between countries. They find support for their hypotheses with information on 71 countries between 1990 and 2000.