Rational Partisan Theory with fiscal policy and an independent central bank

Montserrat Ferré and Carolina Manzano ()

Journal of Macroeconomics, 2014, vol. 42, issue C, 27-37

Abstract: The empirical evidence testing the validity of the Rational Partisan Theory (RPT) has been mixed. In this article, we argue that the inclusion of other macroeconomic policies and the presence of an independent central bank can partly contribute to explain this inconclusiveness. This article expands Alesina’s (1987) RPT model to include an extra policy and an independent central bank. With these extensions, the theoretical implications of RPT are altered significantly. In particular, when the central bank is more concerned about output than public spending (an assumption made by many papers in this literature), then the direct relationship between inflation and output derived in Alesina (1987) never holds.

Keywords: Rational Partisan Theory; Fiscal policy; Independent central bank (search for similar items in EconPapers)
JEL-codes: E58 E63 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Rational Partisan Theory with fiscal policy and an independent central bank (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:42:y:2014:i:c:p:27-37

DOI: 10.1016/j.jmacro.2014.06.003

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