Recent models of inflation consider governments' limited ability to precommit to price stability and consider the relationship of their inflation performance with the electoral cycle. In Discussion Paper No. 657, Research Fellows George Alogoskoufis and Ben Lockwood, with Apostolis Philippopoulos, extend the `rational partisan' model to allow for the effects of unemployment persistence on the dynamics of inflation and combine it with the `exchange rate regime' model to examine the UK experience during 1952-90. Their empirical results indicate as expected that inflation tended to be above average in years following elections, under both Labour and `pre-Thatcher' Conservative administrations, but not during the 1980s. They find no evidence, however, to support the widespread view that
Labour governments are more inflationary in general than Conservative ones.

George Alogoskoufis presented this paper at a March lunchtime meeting, reported in more detail in this issue of the Bulletin.

Wage Inflation, Electoral Uncertainty and the Exchange Rate Regime: Theory and UK Evidence
George Alogoskoufis, Ben Lockwood and Apostolis Philippopoulos

Discussion Paper No. 657, March 1992 (IM)