Do Conservative Central Bankers Weaken the Chances of Conservative Politicians? - Archive ouverte HAL
Preprints, Working Papers, ... Year : 2021

Do Conservative Central Bankers Weaken the Chances of Conservative Politicians?

Maxime Menuet
Hugo Oriola
Patrick Villieu

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.
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Dates and versions

hal-03479411 , version 1 (14-12-2021)

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  • HAL Id : hal-03479411 , version 1

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Maxime Menuet, Hugo Oriola, Patrick Villieu. Do Conservative Central Bankers Weaken the Chances of Conservative Politicians?. 2021. ⟨hal-03479411⟩
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