Policy Makers' Preferences, Party Ideology, and the Political Business Cycle

Abstract

We generate data on the relative preferences of policy makers for inflation and output stability and reexamine how policy makers and political parties behave for 24 countries by using this new approach. This behavior is essential in both the partisan cycle models and the opportunistic political cycle analysis. Our evidence suggests that right-wing parties exhibit a higher relative preference towards stabilizing inflation than left-wing parties. We obtain mixed results on the opportunistic behavior of incumbent parties. Finally, when we analyze the behavior of left and right ideologies separately, we find overwhelming support for party resemblance in the electoral year, and strong evidence of opportunistic conduct by right-wing parties.

The political determinants of liberalization: do ideological cleavages still matter?

“…We measure liberalization policy by subtracting the OECD entry barriers index from its maximum value (let us call this variable Liberalization) and then calculate the intensity of liberalization interventions (Liberalization Intensity) by looking at the one-year differences of Liberalization. 3 To identify the government party's political orientation with respect to economic policy, we use information from the Database of Political Institutions (World Bank 2009), which has been routinely used in cross-country quantitative studies (see, among others, Dutt and Mitra (2005), Krause and Méndez (2005), and Giuliano and Scalise (2009)). We construct three dummy variables-Leftwing, Rightwing, and Otherwhich, respectively, equal 1 if: the government party is defined as socialist, socialdemocratic, communist, or left-wing (Leftwing); it is defined as conservative, Christian democratic, or right-wing (Rightwing); or it is defined as centrist or does not fit into the two previously mentioned categories (Other).…”

A Simple Empirical Measure of Central Banks' Conservatism

“…Some comparisons over time and space reveal that the CONS indicator is in compliance with the monetary history and reputation of the countries under study. Moreover, in section 4 we demonstrate that CONS is equivalent to the measure provided by ; hereafter KM) in terms of optimal interest rate paths. Section 5 presents the advantages of such an indicator for further empirical analysis dealing with the preferences of Central Banks.…”

“… , ) precisely examine the effects of institutional and political factors on their CBC measure but without controlling for the shocks, for the governments' preferences, nor for the potential effects of structural breaks.…”

A Markov‐switching analysis of Nigeria's business cycles: Are election cycles important?

“…The findings suggested that fiscal policies are active while monetary policies are passive, as monetary PBCs in some countries may reflect the accommodation of fiscal shocks. Krause and Mendez (2004) studied party ideology and PBCs in 24 countries. Evidence from the study gave preference to the partisan PBCs over Nordhaus PBCs.…”