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Money and politics in a small open economy

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  • Stanley Winer

Abstract

A time series analysis indicates monetary growth and the Gallup Poll in Canada are systematically related at ‘electoral cycle’ periodicities (5 to 20 quarters) under flexible exchange rates, and demonstrates the absence of an electoral component in Canadian monetary growth under fixed rates. These results confirm empirically a widely accepted extension of the Mundell-Fleming argument that monetary policy is effective only under flexible rates, which to my knowledge has not before been directly investigated: international constraints on the small open economy under fixed rates lead to the abandonment of monetary policy as an active instrument in electoral politics. Copyright Martinus Nijhoff Publishers 1986

Suggested Citation

  • Stanley Winer, 1986. "Money and politics in a small open economy," Public Choice, Springer, vol. 51(2), pages 221-239, January.
    • Handle: RePEc:kap:pubcho:v:51:y:1986:i:2:p:221-239
    DOI: 10.1007/BF00126000
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    References listed on IDEAS

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    1. Jack M. Mintz & Douglas D. Purvis, 1990. "Risk and Economic Policy," Canadian Public Policy, University of Toronto Press, vol. 16(3), pages 298-307, September.
    2. G. L. Reuber, 1964. "The Objectives of Canadian Monetary Policy, 1949-61: Empirical "Trade-Offs" and the Reaction Function of the Authorities," Journal of Political Economy, University of Chicago Press, vol. 72(2), pages 109-109.
    3. Leroy Laney & Thomas Willett, 1983. "Presidential politics, budget deficits, and monetary policy in the United States; 1960–1976," Public Choice, Springer, vol. 40(1), pages 53-69, January.
    4. Frey, Bruno S. & Schneider, Friedrich, 1981. "Central bank behavior : A positive empirical analysis," Journal of Monetary Economics, Elsevier, vol. 7(3), pages 291-315.
    5. Stanley L. Winer, 1986. "The Role of Exchange Rate Flexibility in the International Transmission of Inflation in Long and Shorter Runs: Canada, 1953 to 1981," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 62-86, February.
    6. Stanley L. Winer, 1979. "Short-Run Monetary-Fiscal Influences in a Federal State: with Application to the Canadian Economy, 1947 to 1973," Public Finance Review, , vol. 7(4), pages 395-424, October.
    7. Martin Prachowny, 1977. "The effectiveness of fiscal and monetary policies under fixed and flexible exchange rates: Some empirical evidence for Canada, 1950–1970," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 113(3), pages 462-486, September.
    8. Martin Paldam, 1981. "An essay on the rationality of economic policy: The test-case of the electional cycle," Public Choice, Springer, vol. 37(2), pages 287-305, January.
    9. Jack L. Carr & G. V. Jump & John A. Sawyer, 1976. "The Operation of the Canadian Economy under Fixed and Flexible Exchange Rates: Simulation Results from the TRACE Model," Canadian Journal of Economics, Canadian Economics Association, vol. 9(1), pages 102-120, February.
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    Cited by:

    1. J. Stephen Ferris & Soo-Bin Park & Stanley L. Winer, 2005. "Political Competition and Convergence to Fundamentals: With Application to the Politcal Business Cycle and the Size of the Public Sector," Carleton Economic Papers 05-09, Carleton University, Department of Economics.
    2. J. Ferris & Soo-Bin Park & Stanley Winer, 2008. "Studying the role of political competition in the evolution of government size over long horizons," Public Choice, Springer, vol. 137(1), pages 369-401, October.
    3. J Stephen Ferris & Soo-Bin Park & Stanley L. Winer, 2006. "Political Competition and Convergence to Fundamentals: With Application to the Political Business Cycle and the Size of Government," CESifo Working Paper Series 1646, CESifo.
    4. J. Stephen Ferris & Stanley L. Winer, 2006. "Politics, political competition and the political budget cycle in Canada, 1870 - 2000: a search across alternative fiscal instruments," Carleton Economic Papers 06-05, Carleton University, Department of Economics.

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