Document Type

Conference Proceeding

Publication Date

5-2017

Subjects

Inflation (Finance) -- Effect of elections on, Central banks and banking, Business cycles -- Political aspects

Abstract

It has been argued that elections should affect inflation, but evidence thus far has not incontrovertibly shown such an effect. We argue that monetary institutions offset inflationary pressures originated by the electoral cycle. Delegation of monetary policy to independent central banks curbs politically induced inflationary pressures. The anti-inflationary effects of central bank independence depend on the governments’ incentives to boost the economy, a root of inflationary pressures. Those incentives are stronger in election years, especially when there is uncertainty about the electoral results. Independent central banks are better suited to counter inflation under those circumstances. Statistical analyses on a sample of 143 developing countries between 1980 and 2012 show that the anti-inflationary effects of central bank independence are larger during election years, and when elections are more contested. These results are robust to alternative model specifications and estimation techniques.

Description

Paper prepared to be delivered at the 75th Midwest Political Science Association Annual Convention, April 6-9, 2017, Chicago, IL. A previous draft of this paper was presented at the Seminario Política y Gobierno, Centro de Investigación y Docencia Económicas (CIDE), February 2, 2017.

DOI

10.2139/ssrn.2989162

Persistent Identifier

http://archives.pdx.edu/ds/psu/20541

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