The Impact of Conflicts of Interest on Inflation Stabilization

Vitor Castro

No 8/2003, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This paper tries to explain why high inflation levels persist during long periods of time, in several countries affected by chronic inflation, without the necessary corrective measures being implemented. Political models of conflict explain these delays as the result of coordination problems caused by collective choice-making mechanisms. The empirical results of a tobit model estimated over a panel of 10 countries affected by chronic inflation and covering 43 years of observations show that more fragmented political systems and those with a large number of parties represented in the parliament present greater delays of inflation stabilizations. Since higher fragmentation foments conflicts of interest, I conclude that such conflicts are one of the main causes of those delays in chronic inflation countries.

Keywords: Inflation Stabilization; Delays of Stabilizations; Conflicts of Interest; Tobit Model. (search for similar items in EconPapers)
JEL-codes: E31 E63 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-mon
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