IDEAS home Printed from https://ideas.repec.org/a/ijc/ijcjou/y2022q1a3.html

Central Bank Independence and Systemic Risk

Author

Listed:
  • Alin Marius Andries

    (Alexandru Ioan Cuza University of Iasi)

  • Anca Maria Podpiera

    (World Bank)

  • Nicu Sprincean

    (Alexandru Ioan Cuza University of Iasi)

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.

Suggested Citation

  • Alin Marius Andries & Anca Maria Podpiera & Nicu Sprincean, 2022. "Central Bank Independence and Systemic Risk," International Journal of Central Banking, International Journal of Central Banking, vol. 18(1), pages 81-130, March.
    • Handle: RePEc:ijc:ijcjou:y:2022:q:1:a:3
    as

    Download full text from publisher

    File URL: http://www.ijcb.org/journal/ijcb22q1a3.pdf
    Download Restriction: no
    File URL: http://www.ijcb.org/journal/ijcb22q1a3.htm
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrieş, Alin Marius & Chiper, Alexandra Maria & Ongena, Steven & Sprincean, Nicu, 2024. "External wealth of nations and systemic risk," Journal of Financial Stability, Elsevier, vol. 70(C).
    2. Andries, Alin Marius & Balutel, Daniela, 2022. "The impact of national culture on systemic risk," Economic Systems, Elsevier, vol. 46(2).
    3. Andrieş, Alin Marius & Ongena, Steven & Sprincean, Nicu, 2025. "Sectoral credit allocation and systemic risk," Journal of Financial Stability, Elsevier, vol. 76(C).
    4. Fraccaroli, Nicolò & Sowerbutts, Rhiannon & Whitworth, Andrew, 2025. "Does regulatory and supervisory independence affect financial stability?," Journal of Banking & Finance, Elsevier, vol. 170(C).
    5. Osvald Vasicek & Natalie Uhrova & Lenka Dimitriou Janickova & Tomas Wroblowsky & Boris Navratil, 2023. "Central Bank Independence: Where Do We Stand?," Economies, MDPI, vol. 11(4), pages 1-15, April.
    6. Cep Jandi Anwar & Stephen G Hall & Nermeen Harb & Indra Suhendra & Eka Purwanda, 2023. "Evaluation of central bank independence, macroprudential policy, and credit gap in developing countries," PLOS ONE, Public Library of Science, vol. 18(5), pages 1-15, May.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2022:q:1:a:3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bank for International Settlements (email available below). General contact details of provider: https://www.ijcb.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.