Partisan Theory and the New Keynesian and Sticky-Information Phillips Curves

Abstract

This paper attempts two things: First, to modernize partisan theory by merging the idea of partisan differences in macroeconomic preferences with recent, optimizing models of aggregate supply that account for sluggish nominal adjustment. This aids in resolving some puzzles posed by the current state of partisan theory research. Second, to exploit partisan patterns for a comparison of the empirical performance of the new Keynesian Phillips curve with that of a recent challenger, the sticky-information Phillips curve. It turns out that the sticky-information Phillips curve clearly outperforms its better established rival: in accounting for econometric estimates of partisan patterns in OECD countries, and in tracking postwar experience in the US.

The Political Economy of Monetary Policy Conduct and Central Bank Design

“…- 16 -20 Another candidate that has entered the discussion is the sticky-information Phillips curve proposed by Mankiw and Reis (2002), which seems to have some performance advantages over the New Keynesian Phillips curve not only when subjected to econometric testing, but also when combined with theories of political cycles [see Brevik and Gärtner (2005)]…”

The Political Economy of Monetary Policy Conduct and Central Bank Design

“…It must be combined with the appropriate central bank preferences that compensate for the stabilization bias introduced by the inflation target. 20 Another candidate that has entered the discussion is the sticky-information Phillips curve proposed by Mankiw and Reis (2002), which seems to have some performance advantages over the New Keynesian Phillips curve not only when subjected to econometric testing, but also when combined with theories of political cycles [see Brevik and Gärtner (2005)]…”