Is the Bank of Canada any more or less independent than the Fed? – revised version: Electoral Politics and Monetary Policy: Does the Bank of Canada Contribute to a Political Business Cycle?

J. Stephen Ferris

No 07-02, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: In this paper I apply the work of Abrams and Iossifov (2006) to monetary policy in canada to see if same political party affiliation is needed to produce evidence of political opportunism. After modifying their anaylsis to maintain consistency in the time series dimensions of their variables for Canada, I find both an error correction model and a Taylor rule of reformulation of their test generate evidence consistent with same party political opportunism, but only weakly so. On the other hand, I find also that more traditional indicators of political influence present even more convincing evidence of political dependence. In particular, the data suggest that the election of a Liberal party government, a decrease in the degree of political competition, and to a lesser extent, the election of a minority government all positively influence the expansiveness of Canadian monetary policy. In combination, these findings are consistent with the hypothesis that the Bank of Canada is less rather than more independent that is the Fed.

Keywords: Central Bank Independence; monetary policy; opportunism; Taylor Rule; error correction model; political competition. (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2007-04-29, Revised 2008-01-08
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published: Electoral Politics and Monetary Policy: Does the Bank of Canada Contribute to a Political Business Cycle? Public Choice, Vol. 135, No. 3/4 (June 2008), pp. 449–468

Downloads: (external link)
http://www.carleton.ca/economics/wp-content/uploads/cep07-02.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:07-02

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Carleton Economic Papers from Carleton University, Department of Economics C870 Loeb Building, 1125 Colonel By Drive, Ottawa Ontario, K1S 5B6 Canada.
Bibliographic data for series maintained by Court Lindsay ().