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Globalization Pressures and the State



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1 GLOBALIZATION PRESSURES AND THE STATE THE WORLDWIDE SPREAD OF CENTRAL BANK INDEPENDENCE Simone Polillo Department of Sociology University of Pennsylvania and Mauro F Guill n The Wharton School Department of Sociology University of Pennsylvania 2016 Steinberg Hall Dietrich Hall Philadelphia PA 19104 6370 215 573 6267 guillen wharton upenn edu American Journal of Sociology forthcoming August 2004 Version We are grateful to Paul Allison Sarah Babb Randall Collins Marion FourcadeGourinchas Witold Henisz Hans Peter Kohler Daniel Maman Adrian Tschoegl and Susan Watkins for their comments and suggestions This research has been funded by the University of Pennsylvania s Research Foundation 2 GLOBALIZATION PRESSURES AND THE STATE THE WORLDWIDE SPREAD OF CENTRAL BANK INDEPENDENCE Abstract We examine the impact of globalization on state structures in the specific instance of the central bank Following the world system world society and neo institutional perspectives in sociology we assume that states are in cultural political and economic competition with each other thereby seeking to maintain their position and status frequently by adopting organizational forms or practices that make them isomorphic with their environment We predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade investment and multilateral lending increases We also model the cross national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role equivalent trade relationships between countries We test our hypotheses with information on 71 countries between 1990 and 2000 using both event history modeling and fixed effects panelcorrected regression Controlling for domestic variables of a macroeconomic and political nature we find empirical support for each our predictions We conclude that globalization pressures have the effect of strengthening certain parts of the state at the expense of



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