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Political support for anti-inflationary monetary policy

Author

Listed:
  • Debora Di Gioacchino

    (University of Rome 'La Sapienza', Italy)

  • Sergio Ginebri

    (University of Molise, Italy)

  • Laura Sabani

    (University of Florence, Italy)

Abstract

We model a two-party representative democracy with citizen-candidate in which the leader is elected while the central-banker is appointed by the leader. Assuming that fiscal policy is 'more important' than monetary policy, we show that, if some individuals who dislike inflation get organized in a lobby and offer campaign contribution to the party that proposes a zero-inflation policy, then even if the majority of the population, as well as the majority of party-members, favour inflation, no inflation results in equilibrium. The paper provides a political economy explanation of the role played by financial interest groups in providing political support to anti-inflationary monetary policy. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Debora Di Gioacchino & Sergio Ginebri & Laura Sabani, 2004. "Political support for anti-inflationary monetary policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 187-200.
    • Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:2:p:187-200
    DOI: 10.1002/ijfe.241
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    References listed on IDEAS

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    Cited by:

    1. Debora Di Gioacchino & Sergio Ginebri & Laura Sabani, 2003. "The Political Power of the Owners of Public Debt," Rivista di Politica Economica, SIPI Spa, vol. 93(1), pages 79-118, January-F.
    2. Giovanni Di Bartolomeo & Debora Di Gioacchino, 2005. "Fiscal-Monetary Policy Coordination And Debt Management: A Two Stage Dynamic Analysis," Macroeconomics 0504024, University Library of Munich, Germany.
    3. Di Gioacchino, Debora & Ginebri, Sergio & Sabani, Laura, 2005. "Inequality, redistribution and the allocation of public spending in education. A political-economy approach," Economics & Statistics Discussion Papers esdp05024, University of Molise, Department of Economics.
    4. Giovanni Di Bartolomeo & Debora Di Gioacchino, 2004. "Fiscal- Monetary Policy and Debt Management: a Two Stage Dynamic Analysis," Working Papers in Public Economics 74, University of Rome La Sapienza, Department of Economics and Law.
    5. Louis Rouanet & Peter Hazlett, 2023. "The redistributive politics of monetary policy," Public Choice, Springer, vol. 194(1), pages 1-26, January.

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