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The Impact of Central Bank Independence on Political Monetary Cycles in Advanced and Developing Nations

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  • SAMI ALPANDA
  • ADAM HONIG

Abstract

This paper examines the extent to which monetary policy is manipulated for political purposes during elections. We do not detect political monetary cycles in advanced countries or developing nations with independent central banks. We do find evidence, however, in developing countries that lack central bank independence. Furthermore, we find some evidence that these cycles are not caused by monetization of election‐related fiscal expansions. This suggests that pressure by politicians on the central bank to exploit the Phillips curve may be an important factor in generating political monetary cycles.

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  • Sami Alpanda & Adam Honig, 2009. "The Impact of Central Bank Independence on Political Monetary Cycles in Advanced and Developing Nations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(7), pages 1365-1389, October.
    • Handle: RePEc:wly:jmoncb:v:41:y:2009:i:7:p:1365-1389
    DOI: 10.1111/j.1538-4616.2009.00260.x
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