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Do Conservative Central Bankers Weaken the Chances of Conservative Politicians?

Author

Listed:
  • Maxime Menuet

    (LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours)

  • Hugo Oriola

    (LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours)

  • Patrick Villieu

    (LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours)

Abstract

In this paper, we challenge the claim that an independent conservative central bank strengthens the likelihood of a conservative government. In contrast, if an election is based on the comparative advantages of the candidates, an inflation-averse central banker can deter the chances of a conservative candidate because once inflation is removed, its comparative advantage in the fight against inflation disappears. We develop a theory based on a policy-mix game with electoral competition, predicting that the chances of a conservative (i.e., inflation-averse) party is reduced in the presence of tighter monetary policy. To test this prediction, we examine monthly data of British political history between 1960 and 2015. We show that a 1 percentage point increase in the interest rate in the 10 months prior to a national election decreases the popularity of a Tory government by approximately 0.75 percentage points relative to its trend.

Suggested Citation

  • Maxime Menuet & Hugo Oriola & Patrick Villieu, 2021. "Do Conservative Central Bankers Weaken the Chances of Conservative Politicians?," Working Papers hal-03479411, HAL.
    • Handle: RePEc:hal:wpaper:hal-03479411
    Note: View the original document on HAL open archive server: https://hal.science/hal-03479411
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    Cited by:

    1. Oriola, Hugo, 2023. "Political monetary cycles: An empirical study," European Journal of Political Economy, Elsevier, vol. 79(C).

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    monetary policy; elections; United Kingdom; comparative advantage;
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