Political business cycles and central bank independence

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Political business cycles and central bank independence

Please use this identifier to cite or link to this item: http://hdl.handle.net/10036/31936

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Title: Political business cycles and central bank independence
Author: Maloney, John
Pickering, Andrew C.
Hadri, Kaddour
Citation: Economic Journal, Jan 2003 113(486) p.C167-181
Publisher: Cambridge University Press
Journal: The Economic Journal
Date Issued: 2003
URI: http://hdl.handle.net/10036/31936
DOI: 10.1111/1468-0297.00115
Links: http://www.interscience.wiley.com.
Abstract: This paper develops a dynamic model of Rational Partisan Business Cycles in which wage contracts overlap elections and wage setters have to make a prediction about the election result. Empirical analysis of 20 OECD countries supports the theoretical implication that left wing incumbents increase output, but increased expectation of a left wing regime reduces it. The model is extended to incorporate the effects of alternative measures of Central Bank Independence (CBI). The measure of objective independence outperforms the other measures and it is found that CBI reduces politically induced business cycles.
Type: Article
Description: Pre-print of article available on http://www.interscience.wiley.com
Keywords: central banksindependenceelectionsbusiness cycles
ISSN: 0013013314680297


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