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What inflation policy do American voters want, and do they get it?

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  • Daniel J. Richards

Abstract

Inflation at the time of the 1992 election was at its lowest level in 20 years. This fact might have been expected to give the incumbent Administration a significant advantage, since most previous research regarding voters’ economic preferences has found that American voters have a strong preference for low inflation and a great willingness to tolerate unemployment to reduce inflation. Thus, the 1992 election results raise the possibility that voter preferences either have changed or were mistakenly estimated earlier. ; The author’s goal is to obtain some estimates of the policies and inflation goals that voters deem optimal. He then uses these estimates of voters’ preferred policy outcomes to determine the price that voters are willing to pay to achieve their desired inflation rate. His findings suggest that strong anti-inflation policies are politically quite feasible.

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File URL: http://www.bostonfed.org/economic/neer/neer1993/neer593c.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

Volume (Year): (1993)
Issue (Month): Sep ()
Pages: 33-44

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Handle: RePEc:fip:fedbne:y:1993:i:sep:p:33-44

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Keywords: Inflation (Finance);

References

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  1. Friedman, Milton, 1984. "Lessons from the 1979-82 Monetary Policy Experiment," American Economic Review, American Economic Association, vol. 74(2), pages 397-400, May.
  2. Benjamin M. Friedman, 1984. "Lessons from the 1979-1982 Monetary Policy Experiment," NBER Working Papers 1272, National Bureau of Economic Research, Inc.
  3. David K. Backus & Patrick J. Kehoe, 1991. "International evidence on the historical properties of business cycles," Staff Report 145, Federal Reserve Bank of Minneapolis.
  4. Chappell, Henry W, Jr, 1983. "Presidential Popularity and Macroeconomic Performance: Are Voters Really So Naive?," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 385-92, August.
  5. Bennett T. McCallum, 1984. "Monetarist Rules in the Light of Recent Experience," NBER Working Papers 1277, National Bureau of Economic Research, Inc.
  6. Chappell, Henry W, Jr, 1990. "Economic Performance, Voting, and Political Support: A Unified Approach," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 313-20, May.
  7. Garman, David M & Richards, Daniel J, 1989. "Policy Rules, Inflationary Bias, and Cyclical Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(4), pages 409-21, November.
  8. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  9. Havrilesky, Thomas, 1988. "Monetary Policy Signaling from the Administration to the Federal Reserve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(1), pages 83-101, February.
  10. Franco Modigliani, 1977. "The monetarist controversy; or, should we forsake stabilization policies?," Economic Review, Federal Reserve Bank of San Francisco, issue Spr suppl, pages 27-46.
  11. Kane, Edward J., 1980. "Politics and Fed policymaking : The more things change the more they remain the same," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 199-211, April.
  12. Richards, Daniel J., 1988. "Some evidence on the inflationary bias of macroeconomic policy," Journal of Macroeconomics, Elsevier, vol. 10(3), pages 435-447.
  13. Friedman, Benjamin M, 1984. "Lessons from the 1979-82 Monetary Policy Experiment," American Economic Review, American Economic Association, vol. 74(2), pages 382-87, May.
  14. Canzoneri, Matthew B, 1985. "Monetary Policy Games and the Role of Private Information," American Economic Review, American Economic Association, vol. 75(5), pages 1056-70, December.
  15. MacRae, C Duncan, 1977. "A Political Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 239-63, April.
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