Abstract
In this paper I apply the work of Abrams and Iossifov (Public Choice 129:249–262, 2006) to monetary policy in Canada to see if same political party affiliation is needed to produce evidence of political opportunism. After modifying their analysis to maintain the time-series consistency of their variables for Canada, I find that both an error correction model and a Taylor rule reformulation of their test generate evidence consistent with same party political opportunism, but only weakly so. On the other hand, I also find the presence of more traditional indicators of political influence. In particular, the data suggest that the election of a Liberal party government, a decrease in the degree of political competition, and to a lesser extent, the election of a minority government all positively influence the expansiveness of Canadian monetary policy.
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I would like to thank Patrick Coe, Chuck Freedman, Pierre Siklos, Marcel Voia, and Stan Winer for comments made on earlier versions and particularly both Soo-Bin Park, who led me out of a problem with lags, and the editor and a referee from this Journal, who emphasized the presence of apolitical cyclical influences. None are responsible for remaining errors of omission or commission.
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Ferris, J.S. Electoral politics and monetary policy: does the Bank of Canada contribute to a political business cycle?. Public Choice 135, 449–468 (2008). https://doi.org/10.1007/s11127-007-9272-8
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DOI: https://doi.org/10.1007/s11127-007-9272-8