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Policy Makers' Preferences, Party Ideology, and the Political Business Cycle

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  • Stefan Krause
  • Fabio Méndez

Abstract

We generate data on the relative preferences of policy makers for inflation and output stability and reexamine how policy makers and political parties behave for 24 countries by using this new approach. This behavior is essential in both the partisan cycle models and the opportunistic political cycle analysis. Our evidence suggests that right‐wing parties exhibit a higher relative preference toward stabilizing inflation than left‐wing parties. We obtain mixed results on the opportunistic behavior of incumbent parties. Finally, when we analyze the behavior of left and right ideologies separately, we find overwhelming support for party resemblance in the electoral year and strong evidence of opportunistic conduct by right‐wing parties.

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  • Stefan Krause & Fabio Méndez, 2005. "Policy Makers' Preferences, Party Ideology, and the Political Business Cycle," Southern Economic Journal, John Wiley & Sons, vol. 71(4), pages 752-767, April.
    • Handle: RePEc:wly:soecon:v:71:y:2005:i:4:p:752-767
    DOI: 10.1002/j.2325-8012.2005.tb00674.x
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