Does Populism Erode Central Bank Independence?

We examine the relationship between populism and central bank independence (CBI). Using annual data from around 60 countries between 1996 and 2018, and employing a correlated random effects panel framework, we find that higher levels of populism within a country are associated with a significant reduction in the legal independence of its central bank. However, cross-country differences in populism have no significant effect. Contrary to popular belief, populist regimes are not more likely to replace central bank governors before the end of their term. This suggests that intensified political pressure, rather than early dismissal, is the dominant influence.