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Monetary political business cycles: new democracy setting (in Russian)

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  • Anastasia Burkovskaya

    (University of California Los Angeles, Los Angeles, USA)

Abstract

This paper studies whether politicians manipulate monetary instruments to win elections in the new democracies. The question makes sense because the Central Bank in the new democracy conditions is usually weak. A sample of 8 new democracies is analyzed via individual country vector autoregressions and via simple autoregressions for each variable of interest. I test various opportunistic political cycle models, both with adaptive and rational expectations. My results reject the political business cycle model with adaptive expectations due to the lack in the data of any impact of the electoral monetary expansion on output. However, there is evidence of opportunistic behavior in combination with rational expectations in Hungary, Russia and Mexico. Politicians print money before the elections and decrease the monetary base afterwards, but due to rational expectations they do not influence real variables. In other countries the hypothesis of the presence of monetary political cycles is rejected. However, I find some implications of fiscal political cycles in almost all countries.

Suggested Citation

  • Anastasia Burkovskaya, 2013. "Monetary political business cycles: new democracy setting (in Russian)," Quantile, Quantile, issue 11, pages 75-90, December.
    • Handle: RePEc:qnt:quantl:y:2013:i:11:p:75-90
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    References listed on IDEAS

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    1. Alberto Alesina & Gerald D. Cohen & Nouriel Roubini, 1992. "Macroeconomic Policy And Elections In Oecd Democracies," Economics and Politics, Wiley Blackwell, vol. 4(1), pages 1-30, March.
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    3. Mark Hallerberg & Lúcio Vinhas de Souza & William Roberts Clark, 2002. "Political Business Cycles in EU Accession Countries," European Union Politics, , vol. 3(2), pages 231-250, June.
    4. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1301-1338.
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    6. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(1), pages 1-16.
    7. Svensson, Jakob & Shi, Min, 2002. "Conditional Political Budget Cycles," CEPR Discussion Papers 3352, C.E.P.R. Discussion Papers.
    8. Torsten Persson & Guido Tabellini, 2003. "Do Electoral Cycles Differ Across Political Systems?," Working Papers 232, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    Cited by:

    1. Burkovskaya, Anastasia, 2019. "Political economy behind central bank independence," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.

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    More about this item

    Keywords

    opportunistic political business cycles; monetary policy; central bank; fiscal policy;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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