Political Parties, Elections and Inflation in Greece

George Alogoskoufis and Apostolis Philippopoulos ()

No 547, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We extend the `rational partisan model' of inflation and unemployment by introducing inflation and unemployment dynamics. We investigate the case of Greece, which has had a polarized political system and a problem of persistently high inflation in the last two decades. High inflation can be attributed to the failure of political parties to precommit to price stability. The greater aversion of `socialists' to unemployment results in an inflation rate which is higher by five percentage points than under the more anti-inflationary `conservatives'. Unemployment seems to be independent of the identity of the party in power, and post-election years do not seem to be characterized by systematic mistakes on the part of wage setters as predicted by recent partisan theories.

Keywords: Elections; Greece; Political Parties; Unemployment (search for similar items in EconPapers)
Date: 1991-06
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