Do Conservative Central Bankers Weaken the Chances of Conservative Politicians?

Maxime Menuet, Hugo Oriola () and Patrick Villieu
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Hugo Oriola: LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours

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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.

Keywords: monetary policy; elections; United Kingdom; comparative advantage (search for similar items in EconPapers)
Date: 2021-12-14
New Economics Papers: this item is included in nep-cba, nep-cdm, nep-his, nep-mac, nep-mon and nep-pol
Note: View the original document on HAL open archive server: https://hal.science/hal-03479411
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Do conservative central bankers weaken the chances of conservative politicians? (2024)
Working Paper: Do conservative central bankers weaken the chances of conservative politicians? (2024)
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