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Rational Partisan Theory with fiscal policy and an independent central bank

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  • Ferré, Montserrat
  • Manzano, Carolina

Abstract

The empirical evidence testing the validity of the Rational Partisan Theory (RPT) has been mixed. In this article, we argue that the inclusion of other macroeconomic policies and the presence of an independent central bank can partly contribute to explain this inconclusiveness. This article expands Alesina’s (1987) RPT model to include an extra policy and an independent central bank. With these extensions, the theoretical implications of RPT are altered significantly. In particular, when the central bank is more concerned about output than public spending (an assumption made by many papers in this literature), then the direct relationship between inflation and output derived in Alesina (1987) never holds.

Suggested Citation

  • Ferré, Montserrat & Manzano, Carolina, 2014. "Rational Partisan Theory with fiscal policy and an independent central bank," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 27-37.
    • Handle: RePEc:eee:jmacro:v:42:y:2014:i:c:p:27-37
    DOI: 10.1016/j.jmacro.2014.06.003
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    Cited by:

    1. Montserrat Ferré & Carolina Manzano, 2020. "Independent Central Banks: Low Inflation at No Cost? A Model with Fiscal Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 16(6), pages 233-286, December.
    2. Burkovskaya, Anastasia, 2019. "Political economy behind central bank independence," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    3. Juan Cristóbal Campoy & Juan Carlos Negrete, 2017. "Distortionary Taxation and Central Bank Design in a Monetary Union," Hacienda Pública Española / Review of Public Economics, IEF, vol. 222(3), pages 65-90, September.

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    More about this item

    Keywords

    Rational Partisan Theory; Fiscal policy; Independent central bank;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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