Monetary Policy, Delegation and Polarisation
AbstractThis paper studies the relation between political polarization and delegation of stabilization policy. There is asymmetric information about how the economy works: unlike voters, two political parties know the variance of an employment shock. Prior to an election, each party proposes a central banker to be chosen if the party wins. If political polarization is small, voters will learn the true variance and the central banker and the stabilization policy are the ones most preferred by the median voter. If the political polarization is high, stabilization policy does not reflect the variance but only the preferences of the winning party.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 109 (1999)
Issue (Month): 455 (April)
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Other versions of this item:
- Christian Schultz, . "Monetary Policy, Delegation and Polarization," EPRU Working Paper Series 98-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Christian Schultz, 1998. "Monetary Policy, Delegation and Polarization," Discussion Papers 98-17, University of Copenhagen. Department of Economics.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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