Political Instability, Political Weakness and Inflation: An Empirical Analysis

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Political Instability, Political Weakness and Inflation: An Empirical Analysis

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Sebastian Edwards
Guido Tabellini

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Abstract

In this paper we analyze empirically the most important implications of two family political economy models of inflation: the "myopic? government approach and the "weak" government approach. In myopic government models inflation is the deliberate outcome of politicians strategic behavior, while in weak government models inflation is the unavoidable result of a political struggle between different factions. In testing the implications of these two models we use a new data set on political developments in 76 countries for the period 1971-1982. Using a number of alternative definitions of the inflation tax we find out that the data supports the implications of the myopic governments models; countries with a more unstable political environment tend to rely more heavily on the inflation tax. There is no evidence in favor of the weak government hypothesis.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3721.

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Date of creation: May 1991
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Handle: RePEc:nbr:nberwo:3721

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References listed on IDEAS
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Allan Drazen & Vittorio Grilli, 1990. "The Benefits of Crises for Economic Reforms," NBER Working Papers 3527, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Drazen, A. & Grilli, V., 1991. "The Benefits of Crisis for Economic Reforms," Papers 27-91, Tel Aviv.
- Drazen, Allan & Grilli, Vittorio, 1993. "The Benefit of Crises for Economic Reforms," American Economic Review, American Economic Association, vol. 83(3), pages 598-607, June. [Downloadable!] (restricted)

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Janvier Nkurunziza, 2004. "How Long Can Inflation Tax Compensate For The Loss Of Government Revenue In War Economies? Evidence From Burundi," Development and Comp Systems 0409065, EconWPA. [Downloadable!]
Chris Crowe, 2004. "Inflation, Inequality and Social Conflict," Money Macro and Finance (MMF) Research Group Conference 2004 69, Money Macro and Finance Research Group. [Downloadable!]
Other versions:
- Christopher Crowe, 2004. "Inflation, Inequality and Social Conflict," CEP Discussion Papers dp0657, Centre for Economic Performance, LSE. [Downloadable!]
- Christopher W. Crowe, 2006. "Inflation, Inequality, and Social Conflict," IMF Working Papers 06/158, International Monetary Fund. [Downloadable!]
Stefania Albanesi, . "Inflation and Inequality," Working Papers 199, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
Other versions:
- Albanesi, Stefania, 2002. "Inflation and Inequality," CEPR Discussion Papers 3470, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Albanesi, Stefania, 2007. "Inflation and inequality," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1088-1114, May. [Downloadable!] (restricted)
Sebastian Edwards, 1996. "Public Sector Deficits and Macroeconomic Stability in Developing Countries," NBER Working Papers 5407, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Federico Sturzenegger & Mariano Tommasi, 1992. ""Deadlock" Societies, The Allocation of Time and Growth Performance," UCLA Economics Working Papers 660, UCLA Department of Economics. [Downloadable!]
James L. Butkiewicz & Halit Yanikkaya, 2005. "Time-Consistent Polities and Growth in Developing Countries: An Empirical Analysis," Working Papers 05-02, University of Delaware, Department of Economics. [Downloadable!]
Other versions:
- James L. Butkiewicz & Halit Yanikkaya, 2007. "Time-Consistent Polities and Growth in Developing Countries: An Empirical Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(2), pages 306-323, April. [Downloadable!] (restricted)

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