PONARS Policy Memo 349 - Does Central Bank Independence Matter in Russia?

According to conventional wisdom, since taking office in March 2000 Russian president Vladimir Putin has adopted a two-pronged policy of political centralization and economic liberalization. Russia’s banking system, however, has actually come under increasing state influence during that time. In particular, the Central Bank of Russia (CBR), once a fairly independent (if occasionally troublesome) institution, has lost significant policy autonomy under Putin. While this does not matter (and may even be beneficial) in the short term, in the long run it raises the possibility for governmental abuse of the central bank’s powers and resources. Putin’s taming of the CBR reflects his overall economic strategy for Russia, which aims to increase state coordination and influence over the “commanding heights” of finance and the natural resource industries while simultaneously further liberalizing the rest of the economy.