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Policy Makers' Preferences, Party Ideology, and the Political Business Cycle

  • Stefan Krause
  • Fabio Mendez

We generate a time-series of relative preferences of policy makers for inflation stability using a sample of 24 countries in order to study the behavior of political parties. Such behavior is essential in both the partisan cycle models and the opportunistic political cycle analysis. Our evidence tends to support the partisan view, with right-wing parties exhibiting a higher preference towards stabilizing inflation than left-wing parties, while obtaining mixed results on the opportunistic behavior of incumbent parties. Finally, when we analyze the behavior of separate ideologies, we find overwhelming support of party resemblance on election year and evidence favoring an opportunistic conduct by right-wing parties.

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0319.

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Date of creation: Oct 2003
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Handle: RePEc:emo:wp2003:0319
Contact details of provider: Web page: http://economics.emory.edu/home/journals/
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  1. Glenn D. Rudebusch, 1999. "Is the Fed too timid? Monetary policy in an uncertain world," Working Papers in Applied Economic Theory 99-05, Federal Reserve Bank of San Francisco.
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  12. Stefan Krause, 2003. "Optimal Monetary Policy and the Equivalency between the One-period AD-AS Model and the Forward-looking New Keynesian Model," Emory Economics 0317, Department of Economics, Emory University (Atlanta).
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  25. Stefan Krause, 2003. "Why Should Policy Makers Care About Inflation and Output Variability? The Role of Monetary Policy Stabilization under Asymmetric Information," Emory Economics 0313, Department of Economics, Emory University (Atlanta).
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