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Does Government Ideology Matter in Monetary Policy? – A Panel Data Analysis for OECD Countries

  • Ansgar Belke

    ()

  • Niklas Potrafke

This paper examines the effect of government ideology on monetary policy in a quarterly data set of 15 OECD countries in the period 1980.1–2005.4. Our Taylor-rule specification focuses on the interactions of a new time-variant indicator for central bank independence and government ideology. The results suggest that leftist governments did not decrease short term nominal interest rates at all. In contrast, short term nominal interest rates were higher under leftist governments. A potential reason for this finding might be that leftist governments have sought to make a market-oriented policy shift by delegating monetary policy to conservative central bankers.

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File URL: http://repec.rwi-essen.de/files/REP_09_094.pdf
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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0094.

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Length: 39 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:rwi:repape:0094
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  1. Aizenman, Joshua & Marion, Nancy, 2009. "Using Inflation to Erode the U.S. Public Debt," Santa Cruz Department of Economics, Working Paper Series qt6xf174rs, Department of Economics, UC Santa Cruz.
  2. Tesfaselassie, Mewael F., 2009. "Looking forward: Exiting unconventional monetary policy," Open Access Publications from Kiel Institute for the World Economy 32849, Kiel Institute for the World Economy (IfW).
  3. Andreas Hoffmann & Gunther Schnabl, 2007. "Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets – An Overinvestment View," CESifo Working Paper Series 2100, CESifo Group Munich.
  4. repec:rwi:repape:0085 is not listed on IDEAS
  5. Frederic S. Mishkin, 2009. "Is Monetary Policy Effective During Financial Crises?," NBER Working Papers 14678, National Bureau of Economic Research, Inc.
  6. Frankel, Jeffrey A & Rockett, Katharine E, 1988. "International Macroeconomic Policy Coordination When Policymakers Do Not Agree on the True Model," American Economic Review, American Economic Association, vol. 78(3), pages 318-40, June.
  7. Claudio Borio & Piti Disyatat, 2009. "Unconventional monetary policies: an appraisal," BIS Working Papers 292, Bank for International Settlements.
  8. G. A. Mackenzie & Peter Stella, 1996. "Quasi-Fiscal Operations of Public Financial Institutions," IMF Occasional Papers 142, International Monetary Fund.
  9. Åke Lönnberg & Peter Stella, 2008. "Issues in Central Bank Finance and Independence," IMF Working Papers 08/37, International Monetary Fund.
  10. Carlo Cottarelli & José Vinãls, 2009. "A Strategy for Renormalizing Fiscal and Monetary Policies in Advanced Economies," IMF Staff Position Notes 2009/22, International Monetary Fund.
  11. Peter Stella & Åke Lonnberg, 2008. "Issues in central bank finance and independence," FRB Atlanta Working Paper No. 2008-13, Federal Reserve Bank of Atlanta.
  12. Alain Ize, 2005. "Capitalizing Central Banks: A Net Worth Approach," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 289-310, September.
  13. Peter Stella, 2002. "Central Bank Financial Strength, Transparency, and Policy Credibility," IMF Working Papers 02/137, International Monetary Fund.
  14. Peter Stella, 1997. "Do Central Banks Need Capital?," IMF Working Papers 97/83, International Monetary Fund.
  15. Belke, Ansgar & Rees, Andreas, 2009. "The Importance of Global Shocks for National Policy Makers - Rising Challenges for Central Banks," Ruhr Economic Papers 135, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  16. Schnabl, Gunther & Freitag, Stephan, 2010. "Reverse causality in global current accounts," Working Paper Series 1208, European Central Bank.
  17. Ewerhart, Christian & Tapking, Jens, 2008. "Repo markets, counterparty risk and the 2007/2008 liquidity crisis," Working Paper Series 0909, European Central Bank.
  18. Buiter, Willem H., 2008. "Can Central Banks Go Broke?," CEPR Discussion Papers 6827, C.E.P.R. Discussion Papers.
  19. Peter Stella & Ulrich H. Klueh, 2008. "Central Bank Financial Strength and Policy Performance; An Econometric Evaluation," IMF Working Papers 08/176, International Monetary Fund.
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