Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/61407
Authors: 
Belke, Ansgar
Potrafke, Niklas
Year of Publication: 
2011
Series/Report no.: 
DIW Discussion Papers 1180
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.
Subjects: 
Monetary policy
Taylor rule
government ideology
partisan politics
central bank independence
panel data
JEL: 
E52
E58
D72
C23
Document Type: 
Working Paper

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