Reinterpreting the role of inflation in politico-economic models

Abstract

The author attempting to analyze the interplay between politics and economics is faced with a large number of problems, ranging from an always too small and idiosyncratic data set to the lack of any generally accepted theory of the process which has testable implications. My aims have been (1) to show that past studies have typically treated inflation in an extremely naive way, disregarding the fact that it may have political pluses if unanticipated, and (2) to test the sensitivity of established formulations to what I believe is the more useful view of voter behavior given in Model II. Since Model I and Model II represent polar extremes of amnesiac and eidetic behavior, tests of intermediate lag structures are clearly in order. Because of administration peculiarities, however, lost data points will pose a serious problem.