Political Economics and Macroeconomic Policy

IGIER Working Paper No. 121

99 Pages Posted: 23 Mar 1998

See all articles by Torsten Persson

Torsten Persson

Stockholm University - Institute for International Economic Studies (IIES); London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Guido Tabellini

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

Multiple version iconThere are 2 versions of this paper

Date Written: November 1997

Abstract

This paper surveys the recent literature on the theory of macroeconomic policy. We study the effect of various incentive constraints on the policy making process, such as lack of credibility, political opportunism, political ideology, and divided government. The survey is organized in three parts: Part I deals with monetary policy in a simple Phillips curve model and focuses on credibility, political business cycles, and optimal design of monetary institutions. Part II deals with fiscal policy in a dynamic general equilibrium set up; the main topics covered in this section are credibility of tax policy and political determinants of budget deficits. Part III studies economic growth in models with endogenous fiscal policy.

JEL Classification: A10, E5, E6, H2, H3, O1

Suggested Citation

Persson, Torsten and Tabellini, Guido, Political Economics and Macroeconomic Policy (November 1997). IGIER Working Paper No. 121, Available at SSRN: https://ssrn.com/abstract=57408 or http://dx.doi.org/10.2139/ssrn.57408

Torsten Persson

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden
+46 8 163066 (Phone)
+46 8 164177 (Fax)

London School of Economics & Political Science (LSE)

Houghton Street
London, WC2A 2AE
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Guido Tabellini (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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