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Monetary Policy, Delegation and Polarization

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Author Info

  • Christian Schultz

    (Institute of Economics, University of Copenhagen)

Abstract

This paper studies the relation between political polarization and delegation of stabilization policy. There is asymmetric information about how the economy works: unlike voters, two political parties know the variance of an employment shock. Prior to an election each party proposes a central banker to be chosen if the party wins. If political polarization is small, voters will learn the true variance and the central banker and the stabilization policy are the ones most preferred by the median voter. If the political polarization is high, stabilization policy does not reflect the variance but only the preferences of the winning party.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 98-17.

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Length: 29 pages
Date of creation: Dec 1998
Date of revision:
Publication status: Published in: Economic Journal 109(455) 1999, 164-178
Handle: RePEc:kud:kuiedp:9817

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Keywords: business cycles; polarization; monetary policy;

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Cited by:
  1. Gianmaria MARTINI & Cinzia ROVESTI, 2004. "Antitrust policy and price collusion : public agencies vs delegation," Discussion Papers (REL - Recherches Economiques de Louvain) 2004021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Silvia Dominguez Martinez & Otto H. Swank, 2004. "Polarization, Information Collection and Electoral Control," Tinbergen Institute Discussion Papers 04-035/1, Tinbergen Institute.
  3. Thomas Jensen, 2013. "Elections, Information, and State-Dependent Candidate Quality," Discussion Papers 13-03, University of Copenhagen. Department of Economics.
  4. Bohn, Frank, 2003. "Public Finance under Political Instability and Debt Conditionality," Royal Economic Society Annual Conference 2003 25, Royal Economic Society.
  5. Heidhues, Paul & Lagerlof, Johan, 2003. "Hiding information in electoral competition," Games and Economic Behavior, Elsevier, vol. 42(1), pages 48-74, January.
  6. Schultz, Christian, 2002. "Policy biases with voters' uncertainty about the economy and the government," European Economic Review, Elsevier, vol. 46(3), pages 487-506, March.
  7. Philipp an de Meulen & Christian Bredemeier, 2012. "A Political Winner’s Curse: Why Preventive Policies Pass Parliament so Narrowly," Ruhr Economic Papers 0336, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  8. Silvia Dominguez Martinez & Otto H. Swank, 2004. "Polarization, Information Collection and Electoral Control," Tinbergen Institute Discussion Papers 04-035/1, Tinbergen Institute.
  9. Frank Bohn, 2002. "Eliminating the Inflationary Finance Trap in a Politically Unstable Country: Domestic Politics versus International Pressure," Economics Discussion Papers 551, University of Essex, Department of Economics.
  10. 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.

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