Macroeconomics and Politics Revisited. Do Central Banks Matter?

This paper provides a model encompassing both partisan influences on monetary policy and the issue of Central Bank independence. In a regime of partial independence, Central Bank’s policy responses are not immune from partisan influences. Still, the latter fail to affect sistematically the expected output level in election years. The predictions of the model are consistent with the empirical literature on partisan cycles and account for some of its controversial findings.