Belke, Ansgar; Potrafke, Niklas:
Does Government Ideology Matter in Monetary Policy? A Panel Data Analysis for OECD Countries
2011
In: DIW Diskussionspapiere = Discussion Papers / Deutsches Institut für Wirtschaftsforschung, Heft 1180, S. 1 - 30
Artikel/Aufsatz in Zeitschrift / Fach: Wirtschaftswissenschaften
Fakultät für Wirtschaftswissenschaften » Fachgebiet Volkswirtschaftslehre » Makroökonomik
Titel:
Does Government Ideology Matter in Monetary Policy? A Panel Data Analysis for OECD Countries
Autor(in):
Belke, Ansgar im Online-Personal- und -Vorlesungsverzeichnis LSF anzeigen; Potrafke, Niklas
Erscheinungsjahr
2011
Erschienen in:
DIW Diskussionspapiere = Discussion Papers / Deutsches Institut für Wirtschaftsforschung, Heft 1180, S. 1 - 30
ISSN
WWW URL

Abstract:

This paper examines whether government ideology has influenced monetary policy in OECD countries. We use quarterly data in the 1980.1-2005.4 period and exclude EMU countries. Our Taylor-rule specification focuses on the interactions of a new time-variant index of central bank independence with government ideology. The results show that leftist governments have somewhat lower short-term nominal interest rates than rightwing governments when central bank independence is low. In contrast, short-term nominal interest rates are higher under leftist governments when central bank independence is high. The effect is more pronounced when exchange rates are flexible. Our findings are compatible with the view that leftist governments, in an attempt to deflect blame of their traditional constituencies, have pushed market-oriented policies by delegating monetary policy to conservative central bankers.