Democratization, Neoliberalism and Monetary Policy: An Historical Analysis of Central Bank’s Conservativism in Taiwan
Date Issued
2012
Date
2012
Author(s)
Wu, Chia-Hua
Abstract
This study examines the conservativism of Central Bank of the Republic of China (CBC). CBC’s conservativism was established, once challenged, and consolidated in different political environments.
Established in 1924, CBC was mainly in charge of issuing currency to balance fiscal deficits caused by continuous wars. Serious hyperinflation caused by excessive money supply not only broke down the financial system but also endangered the ROC government’s power over Mainland China. After retreated to Taiwan in 1949, the ROC government underlined the importance of financial stability and empowered CBC the right to implement conservative monetary policy. Although the institutional arrangement was once challenged by the Legislative Yuan in 1979, CBC continuously enjoyed high independence throughout the authoritarian period.
However, the wave of democratization since the 1980s increased the strength of the Legislature Yuan and threatened CBC’s autonomy over monetary policy. To ensure its conservativism, CBC highlighted the importance of “Central Bank Independence (CBI)” and “low inflation” proposed by Neoliberalism to resist the intrusion of other rising political powers. With the strong support of Neoliberalism, CBC maintained its monetary conservativism during democratization period and prevented Policial Monetary Cycle (PMC) from happening. It is concluded that Taiwan’s stable macroeconomic environment was assured by CBC’s conservativism.
Subjects
Central Bank
Conservativism
Neoliberalism
Central Bank Independence
Democratization
SDGs
Type
thesis
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