A partisan explanation of political monetary cycles
ISSN: 2341-2356
Year of publication: 1994
Issue: 2
Pages: 1-19
Type: Working paper
More publications in: Documentos de Trabajo (ICAE)
Abstract
This paper develops a political monetary model based on partisanship and commitment arguments that explains the likely existence of expansionary monetary policy in pre-election periods irrespective of the incumbent party and of permanent partisan differences in monetary policy. The approach taken is to incorporate the option that political parties elaborate electoral economic programs into a rational partisan electoral model. Our results are consistent with the recent empírical findings of Alesina, Cahen, and Roubini (1992, 1993) for a sample including three decades in 18 OECD economies but without relying on opportinistic governmental behavior.