Bridging international political economy and public policy and administration research on central banking

ABSTRACT

Central banking as an avenue of research has been of interest to scholars from International Political Economy (IPE) and Public Policy and Administration (PPA) disciplines. Nevertheless, there is very little dialogue between these two perspectives to bridge macro, meso, micro-level analyses and examine the reciprocal relationship between the global and domestic political economy context and monetary policy conduct. This article investigates the Turkish experience to bridge IPE and PPA scholarship on central banking in emerging economies. In doing so, we adopt an analytic eclectic approach combining multiple structural, institutional, and agential causal explanations with particular reference to the Structure, Institution, and Agency (SIA) theoretical framework. This is because analytic eclecticism complements, speaks to, and selectively incorporates theoretical approaches such as the New Independence Approach (NIA) of IPE and institutional and ideational PPA approaches. Drawing on the empirical context of the historical evolution of the Turkish political economy, we explore domestic and international interactions among micro, meso, and macro levels that shape central banking behavior. Our analysis also reveals how global dynamics are translated into domestic policy choices and how particular ideas influence the policymaking process. The analysis underscores the constraining and enabling influence of international dynamics, politics of ideas on emerging economy central banking, and the essential role individual and organizational agency play in the policymaking process.

KEYWORDS:

• Central banking
• monetary policy
• international political economy
• public policy and administration
• Turkey

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ For analytic eclecticism, see Sil and Katzeinstein (2010).

² Following Kingdon (1984) policy entrepreneurs set the governmental agenda through coupling multiple policy, problem and politics streams. Institutional entrepreneurs use discursive and powering strategies for the institutionalisation of policy ideas (Bakır et al., forthcoming).

³ For an exception, see Bakır (2009).

⁴ The asymmetric interest rate corridor aims to create a managed uncertainty about short-term yields to discourage short-term capital flows (Aysan, Fendoglu, & Kilinc, 2014). The reserve option mechanism allows banks to deposit foreign currencies or gold for their Turkish lira reserve requirements to limit their exposure to external funding (Alper, Kara, & Yorukoglu, 2013). The asymmetric interest rate corridor is a known but rarely used monetary instrument (Goodhart, 2013). The reserve option mechanism, on the other hand, was first developed and utilized by the CBRT. CBRT officials indicate that it was examined closely by IMF officials, but they could not find any flaw in its design and implementation (Yağcı, 2017). Along with these unconventional monetary policy measures, the CBRT adopted a one week repo auction rate as the main policy instrument and began flexible use of liquidity management for its pursuit of financial stability.

⁵ In this section our focus is on the interest rate decisions of the CBRT but we believe that other economic policies under the presidential system require further, more detailed examination in a separate study.

⁶ Following his election by popular vote in August 2014 in the parliamentary regime, the President was re-elected in the presidential elections. Following the June 2018 presidential election, the ruling party of the President regained its absolute majority in the parliament with 317 of 550 seats.

Additional information

Notes on contributors

Mustafa Yagci

Mustafa Yagci is an Assistant Professor of International Political Economy at the Political Science and Public Administration Department of Istinye University, Istanbul.

Caner Bakir

Caner Bakir is a Professor of Political Science with particular emphasis on International and Comparative Political Economy, and Public Policy and Administration of the College of Administrative Sciences and Economics at Koç University.