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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
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  1. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
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  8. 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).
  9. 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).
  10. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
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  12. David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," NBER Working Papers 7461, National Bureau of Economic Research, Inc.
  13. Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2006. "Has Monetary Policy become more Efficient? a Cross-Country Analysis," Economic Journal, Royal Economic Society, vol. 116(511), pages 408-433, 04.
  14. Victor Ginsburgh & Philippe Michel, 1983. "Random timing of elections and the political business cycle," ULB Institutional Repository 2013/151085, ULB -- Universite Libre de Bruxelles.
  15. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
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  24. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  25. Haynes, Stephen E & Stone, Joe A, 1990. "Political Models of the Business Cycle Should Be Revived," Economic Inquiry, Western Economic Association International, vol. 28(3), pages 442-65, July.
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  27. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
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