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Do Politics Cause Regime Shifts In Monetary Policy?

Author

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  • SHIU-SHENG CHEN
  • CHUN-CHIEH WANG

Abstract

type="main" xml:lang="en"> Whether or not politics cause changes in monetary policy is controversial in the literature. This article re-examines the link between politics and regime shifts in monetary policy using two alternative approaches. First, empirical results show that both the presidential and Federal Reserve Bank (Fed) chairmanship regimes do not influence monetary policy under the assumption that the Fed closely follows an interest rate rule. On the other hand, evidence also suggests that changes in political regimes are able to account for the deviations from the optimal Taylor rule. (JEL E52, E58, D78)

Suggested Citation

  • Shiu-Sheng Chen & Chun-Chieh Wang, 2014. "Do Politics Cause Regime Shifts In Monetary Policy?," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 492-502, April.
    • Handle: RePEc:bla:coecpo:v:32:y:2014:i:2:p:492-502
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    References listed on IDEAS

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    Cited by:

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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