چه کسی چرخه های کسب و کار سیاسی را ایجاد می کند: آیا باید بانک مرکزی مقصر دانسته شود؟

Little attempt has been made in studies on political business cycles (PBCs) to separate the effects of fiscal and monetary policy. We assess the effect of monetary policy in a panel model for 14 OECD countries. To answer the question whether central banks actively create political business cycles, we focus on the short-term interest rate as a proxy for the use of monetary instruments. Our results indicate that central banks should not be blamed for creating political business cycles. We find no evidence of cyclical behavior in the short-term interest rate. This conclusion holds whether or not central banks are regarded independent or are constrained by the exchange-rate system.

There are two principal reasons why central banks are independent. First, the inflationary bias is reduced. Many empirical studies provide evidence for that.1 Second, “the most obvious advantage a fully independent central bank has is that of not being influenced by electoral deadlines” (Muscatelli, 1998). That the incumbent government may be inclined to stimulate the economy before elections to enhance reelection probabilities is well-known.2 Are central banks also influenced by electoral deadlines? Put differently, if we observe political business cycles (PBCs) in macroeconomic variables, such as unemployment and the growth rate, who is responsible for creating them—and who should or should not be blamed? Surprisingly, the empirical literature has little to say about the exact role of governments and central banks when it comes to PBCs. Worse, in most previous studies, different institutional features have largely been neglected. Often, the scope for electorally motivated monetary policies is reduced, since national or international restrictions bind central bankers. In a regime of fixed exchange rates, for example, opportunistic policies are less likely to occur than in a flexible exchange-rate system. Similarly, independent central banks are less likely to be involved in electorally motivated policies than central banks that are under the spell of the government. The restricting effects of these institutional features are recognized in economic theory; yet, empirical papers on political business cycles do not explicitly control for them. Clark et al. (1998) argue that common cross-country studies of PBC models may be seriously flawed since they do not account for institutional differences that constrain national policymakers.3 However, these authors only examine economic outcomes (output growth and unemployment). Although these variables are likely to be influenced by monetary policy, there are a number of other influences that may offset or reinforce the impact of monetary policy. Furthermore, the rational political business cycle predicts that policymakers manipulate instruments, while the effects on outcomes are less certain. This paper tends to fill this gap by focusing on policy outcomes for which the central bank can be held responsible, namely the short-term interest rate. We can thereby answer the question whether the central bank can be blamed for active opportunistic behavior. Our sample runs from the 1960s until 1997 and consists of monthly data for 14 OECD countries. The results are simple and strikingly robust. The short-term interest rate shows hardly any sign of a political business cycle. We thus reject the hypothesis that central banks have actively engaged in opportunistic behavior. The outline of the paper is as follows. In the next section, we explain the political business models in more detail and show how internal or external constraints can prevent politicians from using monetary policy for short-sighted purposes. Our estimation results are presented in Section 3. In Section 4, we summarize our findings.

Making central banks independent is often justified by the concern that monetary policy might be opportunistically manipulated: ‘The major argument for Fed independence is that monetary policy is politically neutral and technical. If the Fed is caught with its hand in the electoral cookie jar, then it can hardly claim to be apolitical in any sense of that word’.36 Using short-term interest rates, we have tested whether central banks in OECD countries indeed create political business cycles—and whether the degree of CBI is crucial to prevent that. We have established evidence from two outcomes. First, our results for the country-specific tests, based on the short-term interest rate for 14 OECD countries, show hardly any support for the PBC hypothesis. Two possible explanations arise. First, we could simply conclude that central banks do not manipulate interest rates before elections. This suggests that either governments cannot impose their will on central banks, or that central banks have effectively resisted government's wishes. Our results do not suggest that the degree of statutory central bank independence matters in this respect. Second, our results could be due to the fact that the short-term interest rate is not as tightly controlled by central banks as we have assumed. If financial markets have a strong impact on the short-term interest rate, under rational expectations manipulations are useless. This, however, would have the following implication. If (as the theory suggests) central banks use interest rates to manipulate monetary growth (and ultimately the inflation rate), and if their actions before elections have no effect on the short-term interest rate, then PBCs—if they exist in macroeconomic data, such as GNP growth or unemployment—cannot be due to central bank action, as their actions have no effect. The second source of evidence stems from our panel data regressions. We obtain more or less the same picture, that there is no evidence for central banks actively creating political business cycles. Overall, the implications are clear. If political business cycles in macroeconomic variables, such as unemployment show up, then the central banks should not be blamed. Either their actions have no effect, or they simply do not engage in short-sighted behavior. Further research has to be done to reveal why cyclical behavior can be found in monetary aggregates. Still, if one believes that central banks have the means to control interest rates, then one has to reject the idea that central banks help governments to win elections. Electoral cycles that might appear in monetary aggregates could largely be demand-induced (perhaps due to fiscal behavior), but are not due to central bank action.