Central Bank Independence and Systemic Risk

Alin Marius Andries, Anca Maria Podpiera and Nicu Sprincean
Additional contact information
Alin Marius Andries: Alexandru Ioan Cuza University of Iasi
Anca Maria Podpiera: World Bank
Authors registered in the RePEc Author Service: Alin Marius Andrieș

International Journal of Central Banking, 2022, vol. 18, issue 1, 81-130

Abstract: We investigate the relationship of central bank independence and banks' systemic risk measures. Our results support the case for central bank independence, revealing that central bank independence has a robust, negative, and significant impact on the contribution and exposure of banks to systemic risk. Moreover, the impact of central bank independence is similar for the stand-alone risk of individual banks. Secondarily, we study how the central bank independence affects the impact of selected institutional, country, and banking system indicators on these systemic measures. The results show that there might be trade-offs between central bank independence and a central bank's financial stability mandate and that central bank independence may exacerbate the effect of a crisis on the contribution of banks to systemic risk, hence the need for a coordinated interaction between central banks and the governments. We also find that an increase in central bank independence can ameliorate the effects of environments characterized by a low level of financial freedom or high market power that, by themselves, enhance the systemic risk contribution of banks.

JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.ijcb.org/journal/ijcb22q1a3.pdf (application/pdf)
http://www.ijcb.org/journal/ijcb22q1a3.htm (text/html)

Related works:
Working Paper: Central bank independence and systemic risk (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2022:q:1:a:3

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().