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Price Controls and Electoral Cycles

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  • Carlos M. Asilis
  • Pierre-Richard Agénor

Abstract

This paper studies the interactions between electoral considerations and the imposition of price controls by opportunistic policymakers. The analysis shows that a policy cycle emerges in which price controls are imposed in periods leading to the election, and removed immediately afterwards. The shape of the cycle is shown to depend on the periodicity of elections, the relative weight attached by the public to inflation as opposed to the macroeconomic distortions associated with price controls, the nature of wage contracts, and the degree of uncertainty about the term in office.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 93/89.

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Length: 24
Date of creation: 01 Nov 1993
Date of revision:
Handle: RePEc:imf:imfwpa:93/89

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References

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  1. Guillermo A. Calvo, 1983. "Staggered Contracts and Exchange Rate Policy," NBER Chapters, in: Exchange Rates and International Macroeconomics, pages 235-258 National Bureau of Economic Research, Inc.
  2. Neck, Reinhard, 1991. "The political business cycle under a quadratic objective function," European Journal of Political Economy, Elsevier, vol. 7(4), pages 439-467, November.
  3. Gartner, Manfred, 1994. "Democracy, elections, and macroeconomic policy: Two decades of progress," European Journal of Political Economy, Elsevier, vol. 10(1), pages 85-109, May.
  4. Elhanan Helpman, 1989. "Macroeconomic Effects of Price Controls: The Role of Market Structure," NBER Working Papers 2434, National Bureau of Economic Research, Inc.
  5. Willman, Alpo, 1988. "The collapse of the fixed exchange rate regime with sticky wages and imperfect substitutability between domestic and foreign bonds," European Economic Review, Elsevier, vol. 32(9), pages 1817-1838, November.
  6. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  7. Kiguel, Miguel A & Liviatan, Nissan, 1992. "When Do Heterodox Stabilization Programs Work? Lessons from Experience," World Bank Research Observer, World Bank Group, vol. 7(1), pages 35-57, January.
  8. Pierre-Richard Agénor & Mark P. Taylor, 1991. "Testing for Credibility Effects," IMF Working Papers 91/110, International Monetary Fund.
  9. Cox, Charles C, 1980. "The Enforcement of Public Price Controls," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 887-916, October.
  10. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
  11. Carlos M. Asilis & Pierre-Richard Agénor, 1993. "Price Controls and Electoral Cycles," IMF Working Papers 93/89, International Monetary Fund.
  12. Rudiger Dornbusch & Ferico Sturzenegger & Holger Wolf, 1990. "Extreme Inflation: Dynamics and Stabilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 1-84.
  13. Persson, Torsten & van Wijnbergen, Sweder, 1993. "Signalling, Wage Controls and Monetary Disinflation Policy," Economic Journal, Royal Economic Society, vol. 103(416), pages 79-97, January.
  14. van der Ploeg, Frederick, 1987. "Optimal Government Policy in a Small Open Economy with Rational Expectations and Uncertain Election Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 469-91, June.
  15. Agenor, Pierre-Richard, 1995. "Credibility effects of price controls in disinflation programs," Journal of Macroeconomics, Elsevier, vol. 17(1), pages 161-171.
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Cited by:
  1. Carlos M. Asilis & Pierre-Richard Agénor, 1993. "Price Controls and Electoral Cycles," IMF Working Papers 93/89, International Monetary Fund.
  2. Srinivasan, Sunderasan, 2014. "Economic populism, partial deregulation of transport fuels and electoral outcomes in India," Energy Policy, Elsevier, vol. 68(C), pages 465-475.

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