INFLATION AND ELECTIONS: THEORY AND EVIDENCE FOR SIX OECD ECONOMIES

This paper examines the relation between post-election inflation and the incumbent's re-election chances using data for 50 elections in six OECD economies. Ijnd that post-election inflation is above average if the election race is close but not if the incumbent's election prospects are very good or very poor. The theoretical part of the paper shows that this result is consistent with rational political business cycle models. ( JEL E31)