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INFLATION AND ELECTIONS: THEORY AND EVIDENCE FOR SIX OECD ECONOMIES

Authors

  • Fredrik Carlsen

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    • *Helpful comments and suggestions from Torberg Falch, Scott Gates, Douglas A. Hibbs, Kfire Johansen, Jem Rattse, Bjarne Strom and two referees are gratefully acknowledged. Elfin F. Pedersen provided valuable research assistance. The usual caveats apply.


1 Associate Professor, Norwegian University of Science and Technology, Norway Phone 47 73 59 19 31, Fax 47 73 59 69 54 E-mail Fredrik.carlsen@sv.ntnu.no

Abstract

This paper examines the relation between post-election inflation and the incumbent's re-election chances using data for 50 elections in six OECD economies. Ijnd that post-election inflation is above average if the election race is close but not if the incumbent's election prospects are very good or very poor. The theoretical part of the paper shows that this result is consistent with rational political business cycle models. (JEL E31)

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