In the recent past, most industrial democracies have drastically transformed their monetary policy institutions, making their central banks more independent of direct political control. New Zealand and Italy made the initial efforts to grant independence to their central banks. More recently, France, Spain, Britain, and Sweden have reformed their central banks' independence. Additionally, members of the European Union have implemented a single currency, with an independent European central bank to administer monetary policy.
Banking on Reform stresses the politics surrounding the choices of these institutions, specifically the motivations of political parties. Where intraparty conflicts have threatened a party's ability to hold office, politicians have adopted an independent central bank. Additionally, where political parties have been secluded from the political consequences of economic change, reform has been thwarted or delayed. Many political parties have modified their policy priorities and electoral strategies to balance these conflicting interests and rebuild social coalitions, including monetary reforms.
The drive toward a single currency reflects these political concerns. By delegating monetary policy to the European level, politicians in the member states have removed a potentially divisive issue from the domestic political agenda, thereby allowing parties to reconstruct their support on the foundation of other issues.
William Bernhard provides a variety of evidence, utilizing quantitative and statistical tests to enhance his argument that with monetary policy reforms, parties have sought to draw on the political credibility of an independent central bank to cope with electoral consequences of economic internationalization and deindustrialization.