We model a two-party representative democracy with citizen-candidate in which the leader is elected while the central-banker is appointed by the leader. Assuming that fiscal policy is ‘more important’ than monetary policy, we show that, if some individuals who dislike inflation get organized in a lobby and offer campaign contribution to the party that proposes a zero-inflation policy, then even if the majority of the population, as well as the majority of party-members, favour inflation, no inflation results in equilibrium. The paper provides a political economy explanation of the role played by financial interest groups in providing political support to anti-inflationary monetary policy.

DI GIOACCHINO, D., Ginebri, S., Sabani, L. (2004). Political Support To Anti-Inflationary Monetary Policy. INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, 9(2), 187-200 [10.1002/ijfe.241].

Political Support To Anti-Inflationary Monetary Policy

GINEBRI, SERGIO;
2004-01-01

Abstract

We model a two-party representative democracy with citizen-candidate in which the leader is elected while the central-banker is appointed by the leader. Assuming that fiscal policy is ‘more important’ than monetary policy, we show that, if some individuals who dislike inflation get organized in a lobby and offer campaign contribution to the party that proposes a zero-inflation policy, then even if the majority of the population, as well as the majority of party-members, favour inflation, no inflation results in equilibrium. The paper provides a political economy explanation of the role played by financial interest groups in providing political support to anti-inflationary monetary policy.
2004
DI GIOACCHINO, D., Ginebri, S., Sabani, L. (2004). Political Support To Anti-Inflationary Monetary Policy. INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, 9(2), 187-200 [10.1002/ijfe.241].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11590/123103
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