DP547 Political Parties, Elections and Inflation in Greece
|Author(s):||George Alogoskoufis, Apostolis Philippopoulos|
|Publication Date:||June 1991|
|Keyword(s):||Elections, Greece, Political Parties, Unemployment|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=547|
We extend the `rational partisan model' of inflation and unemployment by introducing inflation and unemployment dynamics. We investigate the case of Greece, which has had a polarized political system and a problem of persistently high inflation in the last two decades. High inflation can be attributed to the failure of political parties to precommit to price stability. The greater aversion of `socialists' to unemployment results in an inflation rate which is higher by five percentage points than under the more anti-inflationary `conservatives'. Unemployment seems to be independent of the identity of the party in power, and post-election years do not seem to be characterized by systematic mistakes on the part of wage setters as predicted by recent partisan theories.