The Role of Regime Type in the Political Economy of Foreign Reserve Accumulation

TY - JOUR

T1 - The Role of Regime Type in the Political Economy of Foreign Reserve Accumulation

AU - Jäger, Kai

PY - 2016/9/1

Y1 - 2016/9/1

N2 - Authoritarian regimes have surpassed democracies in foreign reserve accumulation since the Asian Financial Crisis. Two prominent institutionalist theories could explain this diverging trend in reserves: First, the political business cycle theory, suggesting that reserves are reduced before an election. Second, the veto player theory, implying that a high number of veto players increases the de facto independence of central bankers, who are reluctant to invest in reserves. A time-series cross-sectional analysis for up to 182 countries over the period 1990–2013 shows that democratic governments tend to reduce their reserves before elections. While veto players do not affect reserves directly, a high number of veto players tends to limit a political business cycle before an election. Elections and veto players do not have an influence in authoritarian regimes. Election cycles tend to explain why democracies have relatively fallen behind in a period of massive reserve accumulation.

AB - Authoritarian regimes have surpassed democracies in foreign reserve accumulation since the Asian Financial Crisis. Two prominent institutionalist theories could explain this diverging trend in reserves: First, the political business cycle theory, suggesting that reserves are reduced before an election. Second, the veto player theory, implying that a high number of veto players increases the de facto independence of central bankers, who are reluctant to invest in reserves. A time-series cross-sectional analysis for up to 182 countries over the period 1990–2013 shows that democratic governments tend to reduce their reserves before elections. While veto players do not affect reserves directly, a high number of veto players tends to limit a political business cycle before an election. Elections and veto players do not have an influence in authoritarian regimes. Election cycles tend to explain why democracies have relatively fallen behind in a period of massive reserve accumulation.

KW - Foreign reserves

KW - Political business cycle

KW - Veto players

KW - Central bank independence

KW - Authoritarian institutions

KW - International political economy

U2 - 10.1016/j.ejpoleco.2016.05.001

DO - 10.1016/j.ejpoleco.2016.05.001

M3 - Article

SN - 0176-2680

VL - 44

SP - 79

EP - 96

JO - European Journal of Political Economy

JF - European Journal of Political Economy

ER -