Partisan Business and Budget Cycles with Separate Fiscal and Monetary Authorities

We study partisan business and budget cycles in a set‐up where only fiscal policy is under the full control of the elected government, while an independent central bank makes monetary policy decisions. The government and the central bank are therefore engaged in a non‐cooperative game. It is shown t...

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Bibliographic Details
Published inThe Manchester school Vol. 66; no. 2; pp. 178 - 195
Main Author Ozkan, F. Gulcin
Format Journal Article
LanguageEnglish
Published Oxford, UK and Boston, USA Blackwell Publishers Ltd 01.03.1998
Blackwell Publishing Ltd
Subjects
Budgets
Business cycles
Central banks
Economic models
Fiscal policy
Government
Inflation
Monetary policy
Studies
Taxation
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Summary:We study partisan business and budget cycles in a set‐up where only fiscal policy is under the full control of the elected government, while an independent central bank makes monetary policy decisions. The government and the central bank are therefore engaged in a non‐cooperative game. It is shown that a leftist government produces higher inflation but, contrary to the earlier results, lower output than a rightist government in all election and non‐election periods. A leftist government also taxes and spends more than a rightist government. The model produces both partisan business and budget cycles due to the timing of elections. Partisan budget cycles are a novel concept and are analyses of post‐election fiscal movements as opposed to the pre‐election analyses in political budget cycles literature.
Bibliography:ark:/67375/WNG-D7NXJBVN-8
ArticleID:MANC096
istex:33E61C95087BD1912857F0A9AC72913A0EBE9DD1
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:1463-6786
1467-9957
DOI:10.1111/1467-9957.00096