Central Bank Independence in Transition Economies

Central Bank Independence… 

S&A No. 120 

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amount of credit to the Government, one of the most important element of economic 

independence, also vary considerably from very strict as in case of Czech and Slovak 

Republic to almost non-existing as in Belarus and Ukraine (the exact comparison is 

very difficult because of different basis set for the limits). 

 

In the discussion on GMT index in chapter 2 several arguments are presented for 

and against placing the banking supervision in the structure of the Central Bank. In the 

sample under investigation only two countries (Hungary and Slovak Republic) have 

the banking supervision outside the Central Bank. Thus the supervision seems to be 

perceived as a traditional role of the Central Bank. It is interesting to note that in the 

conflict between the Governor of the National Bank of Poland and the Minister of 

Finance in 1994 the Governor strongly opposed delegating the banking supervision to 

the external body. Nevertheless, I follow GMT in identifying the Banks not engaged in 

the supervisory activity as more independent. The main argument for that is a political 

pressure on the Bank to conduct large scale rescue operations which may undermine 

other policy goals. 

The sum of the elements in the table gives the index of economic independence. 

The most (economically) independent Central Bank is in Slovak Republic, the least 

independent are Banks in Belarus, Ukraine, Romania and Russia.