The political economy of IMF forecasts

We investigate the political economy of IMF forecasts with data for 157 countries (1999–2005). Generally, we find evidence of forecast bias in growth and inflation. Specifically, we find that countries voting with the United States in the UN General Assembly receive lower inflation forecasts as domestic elections approach. Countries with large loans outstanding from the IMF also receive lower inflation forecasts, suggesting that the IMF engages in “defensive forecasting.” Finally, countries with fixed exchange rate regimes receive lower inflation forecasts, suggesting the IMF desires to preserve stability as inflation can have detrimental effects under such an exchange rate regime.     

Domestic political determinants of inflation

Abstract. Political economists have advanced a variety of diverse and competing hypotheses to explain the domestic political dimension of inflation. With few exceptions, however, these hypotheses have been tested individually without regard to competing explanations. This study uses pooled time-series data on fifteen industrial democracies to examine five prominent political hypotheses that purport to explain either political pressures that cause inflation or institutional arrangements that insulate governments from these pressures. The results indicate that: (1) Central Bank independence provides an effective counterweight to inflation by insulating monetary policy making from inflationary (particularly, partisan) impulses; (2) Government spending increases caused by distributive and redistributive politics intensify inflationary pressures even in countries with independent Central Banks and neocorporatist arrangements; (3) Inflation is determined partially by the ideology of the party controlling government. Leftist governments in pursuit of income redistribution produce higher inflation than conservative governments; (4) Elections do not have significant effects on inflation under any structural circumstances; and (5) Neocorporatism does not consistently reduce inflation or contain the inflationary effects of partisan manipulation and fiscal expansion. However, neocorporatism may stop inflation if wage moderation by labour is accompanied by the government's commitment to pursue restrictive monetary policy.     

Does inequality cause inflation?: The political economy of inflation,taxation and government debt

Public Choice - A democratic society in which the distribution of wealth is unequal elects political parties that are likely to represent the interests of poor people. It is in the interests of the...     

Random timing of elections and the political business cycle

In his 1975 paper, Nordhaus formally proves that governments whose aim is to be reelected, will generate ‘political’ business cycles. Empirical results do not confirm this proposition, especially in countries used to early elections. We show that if there is a non-zero probability for elections to be called before the legal term, the political business cycle will be less pronounced, even if no early election actually takes place; moreover, if the normal electoral cycle is interrupted before the legal term, one might observe an inversion of the business cycle, or no cycle at all.     

On the political economy of national tax revenue forecasts: evidence from OECD countries

Sustainable budgets are important quality signals for the electorate. Politicians might thus have an incentive to influence tax revenue forecasts, which are widely regarded as a key element of national budget plans. Looking at the time period from 1996 to 2012, we systematically analyze whether national tax revenue forecasts in 18 OECD countries are biased due to political manipulation. Drawing on theories from the field of political economy, we test three hypotheses using panel estimation techniques. We find support for partisan politics. Left-wing governments seem to produce more optimistic, or less pessimistic, tax revenue forecasts than do right-wing ones. Contrary to the theoretical prediction based on the “common pool” problem, we find that more fragmented governments and parliaments tend to produce more pessimistic, or less optimistic, tax revenue forecasts. We find no empirical evidence that political business cycles play a role in tax revenue forecasts.     

Goods diversion and repressed inflation: Notes on the political economy of price liberalization

Most analyses of parallel markets in centrally-planned systems focus on queue-rationing as the mechanism whereby state-sector goods become available for second economy resale. This article takes into account employee diversion of goods as a second channel through which merchandise can move to private markets. Diversion of goods tends to temper the adverse distributional consequences of price liberalization. As repressed inflation increases, more goods are diverted out of the state sector, and the likelihood that an individual will be made worse off by a transition of free prices is diminished.     

The limits and rewards of political opportunism: How electoral timing affects the outcome of currency crises

Politicians are often assumed to be opportunistic. This article examines both whether there is a limit to this opportunism and whether voters reward policy makers for opportunistic behaviour. By looking at currency crisis situations, the article presents a graphic rational opportunistic political business cycle model in which incumbents face a tradeoff between their wish to signal competence and the economic constraints imposed by the crisis. It analyses how electoral incentives affect policy makers' management of currency crises and how this management in turn affects the subsequent election outcome. The empirical results of probit models with selection using a sample of 122 crises in 48 industrial and developing countries between 1983 and 2003 confirm the model's prediction that under certain circumstances some types of policy makers do indeed have incentives to deviate from optimal policy in the run-up to elections – and that voters reward this behaviour by re-electing policy makers who follow such strategies. However, there is a limit to the readiness to manipulate: when speculative pressure is too severe, incumbents no longer manipulate policy but implement the least painful policy option instead.     

The British general election: Synthetic forecasts

Election forecasting work, in Britain and elsewhere, has been confined mainly to traditional approaches – statistical modeling or poll-watching. We import a new approach, which we call synthetic modeling. These models, developed out of forecasting efforts from the American 2012 presidential election, we are currently testing in a comparative European context. In this exercise, we apply the strategy to forecasting British general elections, in particular the upcoming 2015 contest. These synthetic forecasts come from hybrid models blending structural knowledge with contemporary public opinion. We generate ongoing nowcasts, from six months prior, to one month before, Election Day itself.     

Political distortions in state forecasts

This study provides evidence that political incentives lead state budget officials to make biased forecasts. Specifically, the budget in the year that ends right before an election is based on overly optimistic forecasts. Similarly, the budget that starts right before an election is also based on optimistic forecasts. These biases are even larger if the incumbent party is more likely to lose the gubernatorial election. Accordingly, budget deficits are $27 per capita higher in election years and $26 per capita higher the following year.     

小康社会的政治定位

政治文明是小康社会不可或缺的组成部分 ,全面建设小康社会的现代化进程要求把政治文明建设放到突出的战略地位上来。定位全面小康社会的政治文明要确立政治民主化、政治公开化、政治公正化、政治科学化、政治法治化、政治效率化、政治廉洁化、政治秩序化八个方面的政治价值指标。小康社会的政治文明建设应转移到制度文明的重心上来。     

The political economy of hyperinflation in Venezuela

Public Choice - We study the Venezuelan hyperinflation as a political phenomenon with distributional and efficiency effects. The hyperinflation originated in publicly financed benefits for the...     

The regulation of political financing in Portugal

The regulation of political financing in Portugal has taken place through successive waves of reform since the adoption of the first decree which gave legal recognition to parties in 1974. The incremental nature of adjustments and the overall inefficacy of instruments adopted, often introduced without a clear understanding of the problems and opportunities for impropriety and corruption, can be interpreted as an attempt by the political class to anticipate the worst, that is, scandal and the threat this would represent to the normal performance of democracy. In spite of the legislators' increased knowledge about successes and failures of foreign regulatory experiences and the importation of instruments tested abroad, Portuguese regulatory efforts are shaped by specific lines of legal-historical development and the dominant attitudes of Portuguese society towards that sort of illegality.     

The political geography of electoral autocracies: The influence of party strongholds on political beliefs in Africa

In electoral autocracies, why do some citizens view the state as autocratic, while others see it as democratic and legitimate? Traditionally, indicators such as income and education have been the most important factors to explaining how different types of citizens understand politics. This article argues that in electoral autocracies, we must also take into account the role of political geography. In these types of regimes, opposition parties are often one of the only actors that provide information about the authoritarian nature the government, but their message tends to get quarantined within their strongholds. I argue that regardless of income, education, ethnicity, access to government spending, or even partisanship, citizens living in opposition strongholds should be far more likely to view the state as autocratic and illegitimate than citizens living in ruling party strongholds. I find evidence for this theory using Afrobarometer survey data paired with constituency-level electoral returns from five electoral autocracies in sub-Saharan Africa.     

The political value of languages

A theory of linguistic justice needs to take into account the three distinct values of language as a medium for communication, as a source of individual identity and as an instrument for political self-government. Doing so would undermine Van Parijs’ claim that political borders and peoples should be downgraded to a purely instrumental role for purposes of social justice. But it would widen the scope of egalitarian global justice by including a universal right of individuals to membership self-governing polities and it could provide more solid theoretical foundations for his defence of coercive territorial language regimes.