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An Equilibrium Politico-Economic Model


  • Ellis, Christopher J


A politico-economic model is developed in which rationally-formed forecasts are available to all traders. Systematic government policy is neutral, but a large majority of the electorate, those who adopt rationally formed forecasts, but do not know the model, hold the government responsible for the economy's performance. Real and political shocks generate novel feedback effects due to anticipated regime changes. These feedback effects may amplify or dampen the initial shocks; this depends on whether the government follows a high or low monetary growth rate rule and whether inflation or unemployment is the main concern of the electorate. Copyright 1989 by Oxford University Press.

Suggested Citation

  • Ellis, Christopher J, 1989. "An Equilibrium Politico-Economic Model," Economic Inquiry, Western Economic Association International, vol. 27(3), pages 521-528, July.
  • Handle: RePEc:oup:ecinqu:v:27:y:1989:i:3:p:521-28

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