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Exchange-Rate Regimes, Political Parties and the Inflation-Unemployment Tradeoff: Evidence from Greece

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  • George Alogoskoufis
  • Dong-Ho Lee
  • Apostolis Philippopoulos

Abstract

We use Greek data during 1960–1994 to test and estimate a model in which wage inflation, price inflation and unemployment depend on the exchange rate regime, the identity of the political party in power and whether an election is expected to take place. We respect the Lucas critique and take into account the statistical properties of the data. The main results are: (i) The exchange rate regime matters for inflation. After the fall of the Bretton Woods regime in 1972, there is a Barro-Gordon type inflation bias due to the inability of all policymakers to precommit to low inflation. (ii) There are no Barro-Gordon type partisan differences in inflation or unemployment. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • George Alogoskoufis & Dong-Ho Lee & Apostolis Philippopoulos, 1998. "Exchange-Rate Regimes, Political Parties and the Inflation-Unemployment Tradeoff: Evidence from Greece," Open Economies Review, Springer, vol. 9(1), pages 39-51, January.
    • Handle: RePEc:kap:openec:v:9:y:1998:i:1:p:39-51
    DOI: 10.1023/A:1008275222924
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    Cited by:

    1. Alogoskoufis, George, 2021. "Historical cycles of the economy of modern Greece from 1821 to the present," LSE Research Online Documents on Economics 109848, London School of Economics and Political Science, LSE Library.
    2. Alogoskoufis, George, 2023. "The twin deficits, monetary instability and debt crises in the history of modern Greece," LSE Research Online Documents on Economics 120344, London School of Economics and Political Science, LSE Library.
    3. Constantina Kottaridi & Mendez-Carbajo Diego & D. Thomakos Dimitrios, 2009. "Inflation Dynamics and the Cross-Sectional Distribution of Prices in the E.U. Periphery," Springer Books, in: Takashi Kamihigashi & Laixun Zhao (ed.), International Trade and Economic Dynamics, pages 449-475, Springer.
    4. Alogoskoufis, George, 2019. "Greece and the euro: a Mundellian tragedy," LSE Research Online Documents on Economics 102645, London School of Economics and Political Science, LSE Library.
    5. Alogoskoufis, George, 2023. "The state and the economy of modern Greece: key drivers from 1821 to the present," LSE Research Online Documents on Economics 118793, London School of Economics and Political Science, LSE Library.
    6. repec:rim:rimwps:43-07 is not listed on IDEAS

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    More about this item

    Keywords

    exchange rates; inflation; political business cycles; unit roots;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F30 - International Economics - - International Finance - - - General

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