We study the Chinese experience and provide evidence that central banks can play an active role in safeguarding financial stability. The narrative approach is used to disentangle macropudential policy actions from monetary actions. We show that reserve requirements, window guidance, supervisory pressure and housing-market policies can be used for macroprudential purposes. Our VAR estimates suggest that well-targeted macroprudential policy has immediate and persistent impact on credit, but no statistically significant impact on output. Macroprudential policy can be used to retain financial stability without triggering an economic slowdown, or as a complement to monetary policy to offset the buildup of financial vulnerabilities arising from monetary easing. The multi-instrument framework enables central banks to achieve both macroeconomic and financial stability.

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This paper combines ideas from models of electoral competition with forward-looking voters and models of electoral competition with backward-looking voters. Two political parties can commit in advance to policy platforms, but not to a maximum level of rent extraction. In the case without uncertainty, the electorate can limit rents to the same extent as in a purely backward-looking model of accountability, and the policy preferred by the voter who represents the median preferences of the electorate is implemented. In the case with uncertainty about the bliss point of the representative voter, the electorate has to accept higher rent seeking by the incumbent politician, but nonetheless retains some control over rent extraction. The policy positions of the two competing parties do not converge as they do in the case without uncertainty. I show in an example that this nonconvergence can increase the welfare of the representative voter.

I analyse the interaction between post-election lobbying and the voting decisions of forward-looking voters. The existing literature has shown that in models with citizen candidates from a dispersed distribution of preferences, lobbying has no influence on implemented policy. In my model with ideological parties, lobbying is shown to have an effect on policy. In terms of welfare, I show that the median voter and the majority of voters can be better off with lobbying.So far, we have just ignored that the interest groups might face a budget constraint. The model is easily adjusted to the case of an interest group that cannot spend more than a fixed amount B of funds. If B ≥ f * J for J = L , R nothing changes because the constraint is not binding. When B < f * J , the best the interest group can achieve is to move implemented policy as far as possible in the direction of its own bliss point given its budget constraint. Given the utility functionthe parties the policy of party J * = L , R after winning the election is given by: 1/δ 9 The alternative policy weight α J (B, α J ) solves bI +α J (B,αJ )bJ 1+α J (B,αJ ) = b J − ( B α δ−1 J ) 1/δ if b I < b J respectively bI +α J (B,αJ )bJ 1+α J (B,αJ ) = b J + ( B α δ−1 J ) 1/δ if b I > b J .

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