Hostname: page-component-8448b6f56d-c47g7 Total loading time: 0 Render date: 2024-04-19T10:45:53.461Z Has data issue: false hasContentIssue false
  • English
  • Français

Societal Preferences, Partisan Agents, and Monetary Policy Outcomes

Published online by Cambridge University Press:  15 April 2003

David H. Bearce
Get access

Abstract

If different producer groups have divergent interests concerning macroeconomic policies, how do societal preferences translate into state policy outcomes? I develop and test a party-as-agent framework for understanding the importance of societal preferences with regard to monetary policy under capital mobility. Following the principal-agent model, political parties function as agents for different societal principals. Rightist parties tend to represent internationally oriented business groups with preferences for monetary convergence, while leftist parties do the same for domestically oriented groups preferring monetary autonomy under capital mobility. I present statistical evidence showing that OECD leftist governments have been associated with more monetary autonomy and currency variability than their rightist counterparts, even after controlling for basic economic indicators such as inflation. The statistical evidence also shows that societal group size tends not to explain either autonomous monetary policy choices or exchangerate stability. Thus even large and wealthy societal groups may be unable to obtain their preferred policy outcome when their respective partisan agents do not hold government power.

Type
Articles
Information
International Organization , Volume 57 , Issue 2 , Spring 2003 , pp. 373 - 410
Copyright
Copyright © The IO Foundation 2003

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Achen, Christopher H. 2000. Why Lagged Dependent Variables Can Suppress the Explanatory Power of Other Independent Variables. Unpublished manuscript, University of Michigan, Ann Arbor.Google Scholar
Aldrich, John. 1995. Why Parties? The Origins and Transformation of Political Parties in America. Chicago: University of Chicago Press.CrossRefGoogle Scholar
Alt, James E., Frieden, Jeffry A., Gilligan, Michael J., Rodrik, Dani, and Rogowski, Ronald. 1996. The Political Economy of International Trade: Enduring Puzzles and an Agenda for Inquiry. Comparative Political Studies 29 (6):689–717.CrossRefGoogle Scholar
Austen-Smith, David, and Wright, John R.. 1994. Counteractive Lobbying. American Journal of Political Science 38 (1):25–44.Google Scholar
Bearce, David H. 2002. Monetary Divergence: Domestic Political Institutions and the Monetary Autonomy-Exchange Rate Stability Trade-Off. Comparative Political Studies 35 (2):194–220.Google Scholar
Bearce, David H., and Eric, O'N. Fisher. 2002. Economic Geography, Trade, and War. Journal of Conflict Resolution 46 (3):365–93.CrossRefGoogle Scholar
Beck, Nathaniel, and Katz, Jonathan N.. 1995. What to Do (and Not to Do) with Times-Series Cross-Section Data. American Political Science Review 89 (3):634–47.CrossRefGoogle Scholar
Becker, Gary S. 1983. A Theory of Competition Among Pressure Groups for Political Influence. Quarterly Journal of Economics 98 (3):371–400.CrossRefGoogle Scholar
Bernhard, William, and Leblang, David. 1999. Democratic Institutions and Exchange-Rate Commitments. International Organization 53 (1):71–97.CrossRefGoogle Scholar
Boix, Carles. 1998. Political Parties, Growth and Equality: Conservative and Social Democratic Economic Strategies in the World Economy. New York: Cambridge University Press.CrossRefGoogle Scholar
Broz, J. Lawrence, and Frieden, Jeffry A.. 2001. The Political Economy of International Monetary Relations. Annual Review of Political Science 4:317–43.Google Scholar
Cameron, David R. 1984. Social Democracy, Corporatism, Labour Quiescence and the Representation of Economic Interests in Advanced Capitalist Society. In Order and Conflict in Contemporary Capitalism, edited by Goldthorpe, John H., 143–78. Oxford: Clarendon Press.Google Scholar
Clark, William Roberts, and Hallerberg, Mark. 2000. Mobile Capital, Domestic Institutions, and Electorally Induced Monetary and Fiscal Policy. American Political Science Review 94 (2):323–46.Google Scholar
Cohen, Stephen D. and Meltzer, Ronald I.. 1982. United States International Economic Policy in Action: Diversity of Decision Making. New York: Praeger.Google Scholar
Cukierman, Alex, Webb, Steven B., and Neyapti, Bilin. 1992. Measuring the Independence of Central Banks and Its Effect on Policy Outcomes. World Bank Economic Review 6 (3):353–98.CrossRefGoogle Scholar
Destler, I. M., and Henning, C. Randall. 1989. Dollar Politics: Exchange Rate Policymaking in the United States. Washington, D.C.: Institute for International Economics.Google Scholar
Downs, Anthony. 1957. An Economic Theory of Democracy. New York: Harper and Row.Google Scholar
Esping-Andersen, Gosta. 1999. Politics Without Class: Postindustrial Cleavages in Europe and America. In Continuity and Change in Contemporary Capitalism, edited by Kitschelt, Herbert, Lange, Peter, Marks, Gary, and Stephens, John D., 293–316. New York: Cambridge University Press.Google Scholar
Evans, Geoffrey, ed. 1999. The End of Class Politics? Class Voting in Comparative Context. Oxford: Oxford University Press.Google Scholar
Ferguson, Thomas, and Rogers, Joel. 1986. Right Turn: The Decline of the Democrats and the Future of American Politics. New York: Hill and Wang.Google Scholar
Fleming, J. Marcus. 1962. Domestic Financial Policies Under Fixed and Floating Exchange Rates. IMF Staff Papers 3 (9):369–79.CrossRefGoogle Scholar
Frieden, Jeffry A. 1991. Invested Interests: The Politics of National Economic Policies in a World of Global Finance. International Organization 45 (4):425–51.CrossRefGoogle Scholar
Frieden, Jeffry A. 1994a. Making Commitments: France and Italy in the European Monetary System, 1979–1985. In The Political Economy of European Monetary Unification, edited by Frieden, Jeffry A. and Eichengreen, Barry, 25–46. Boulder, Colo.: Westview Press.Google Scholar
Frieden, Jeffry A. 1994b. Exchange Rate Politics: Contemporary Lessons from American History. Review of International Political Economy 1(1):81–103.CrossRefGoogle Scholar
Frieden, Jeffry A. 1996a. The Impact of Goods and Capital Market Integration on European Monetary Politics. Comparative Political Studies 29 (2):193–222.CrossRefGoogle Scholar
Frieden, Jeffry A. 1996b. Economic Integration and the Politics of Monetary Policy in the United States. In Internationalization and Domestic Politics, edited by Keohane, Robert O. and Milner, Helen V., 108–36. New York: Cambridge University Press.Google Scholar
Frieden, Jeffry A.. 2002. Real Sources of European Currency Policy: Sectoral Interests and European Monetary Integration. International Organization 56 (4):831–60.CrossRefGoogle Scholar
Garrett, Geoffrey. 1995. Capital Mobility, Trade, and the Domestic Politics of Economic Policy. International Organization 49 (4):657–87.CrossRefGoogle Scholar
Garrett, Geoffrey. 1998. Partisan Politics in the Global Economy. New York: Cambridge University Press.CrossRefGoogle Scholar
Garrett, Geoffrey, and Lange, Peter. 1995. Internationalization, Institutions, and Political Change. International Organization 49 (4):627–55.CrossRefGoogle Scholar
Gill, Stephen R., and Law, David. 1989. Global Hegemony and the Structural Power of Capital. International Studies Quarterly 33 (4):475–99.CrossRefGoogle Scholar
Giovannini, Alberto. 1992. Economic and Monetary Union: What Happened? Exploring the Political Dimension of Optimum Currency Areas. Unpublished manuscript, Columbia University, New York.Google Scholar
Gowa, Joanne. 1988. Public Goods and Political Institutions: Trade and Monetary Policy Processes in the United States. International Organization 42 (1):15–32.CrossRefGoogle Scholar
Hefeker, Carsten. 1997. Interest Groups and Monetary Integration: The Political Economy of Exchange Regime Choice. Boulder, Colo.: Westview Press.Google Scholar
Henning, C. Randall. 1994. Currencies and Politics in the United States, Germany, and Japan. Washington, D.C.: Institute for International Economics.Google Scholar
Hibbs, Douglas A. Jr 1977. Political Parties and Macroeconomic Policy. American Political Science Review 71 (4):1467–87.CrossRefGoogle Scholar
Himmelstein, Jerome L. 1990. To the Right: The Transformation of American Conservatism. Berkeley: University of California Press.Google Scholar
Hout, Michael, Manza, Jeff, and Brooks, Clem. 1999. Classes, Unions, and the Realignment of U.S. Presidential Voting, 1952–1992. In The End of Class Politics? Class Voting in Comparative Context, edited by Evans, Geoffrey, 83–96. New York: Oxford University Press.CrossRefGoogle Scholar
Ikenberry, G. John, Lake, David A., and Mastanduno, Michael. 1988. Introduction: Approaches to Explaining American Foreign Economic Policy. International Organization 42 (1):1–14.CrossRefGoogle Scholar
International Monetary Fund (IMF), various years. Exchange Arrangements and Exchange Restrictions Annual Report. Washington, D.C.: IMF.Google Scholar
International Monetary Fund, various years. International Financial Statistics CD-ROM. Washington, D.C.: IMF.Google Scholar
Iversen, Torben. 1994. The Logics of Electoral Politics: Spatial, Directional, and Mobilizational Effects. Comparative Political Studies 27 (2):155–89.CrossRefGoogle Scholar
Jacobs, David C.D. 1999. Business Lobbies and the Power Structure in America: Evidence and Arguments. Westport, Conn.: Quorum Books.Google Scholar
Kapstein, Ethan B. 1996. Workers in a World Economy. Foreign Affairs 75 (3):16–37Google Scholar
Kirschen, E. S., Bernard, J., Besters, H., Blackaby, F., Eckstein, O., Faaland, J., Hartog, F., Morissens, L., and Tosco, E.. 1964. Economic Policy in Our Time. Vol. 1. Amsterdam: North-Holland.Google Scholar
Kitschelt, Herbert. 1994. The Transformation of European Social Democracy. New York: Cambridge University Press.CrossRefGoogle Scholar
Krasner, Stephen D. 1978a. United States Commercial and Monetary Policy: Unraveling the Paradox of External Strength and Internal Weakness. In Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States, edited by Katzenstein, Peter J., 51–87. Madison: University of Wisconsin Press.Google Scholar
Krasner, Stephen D. 1978b. Defending the National Interest: Raw Materials Investments and U.S. Foreign Economic Policy. Princeton, N.J.: Princeton University Press.Google Scholar
Kurzer, Paulette. 1993. Business and Banking: Political Change and Economic Integration in Western Europe. Ithaca, N.Y.: Cornell University Press.Google Scholar
Lane, Jan-Eric, McKay, David, and Newton, Kenneth. 1991. Political Data Handbook: OECD Countries. New York: Oxford University Press.Google Scholar
Leblang, David, and Bernhard, William. 2000. The Politics of Speculative Attacks in Industrial Democracies. International Organization 54 (2):291–324.Google Scholar
McNamara, Kathleen R. 1998. The Currency of Ideas: Monetary Politics in the European Union. Ithaca, N.Y.: Cornell University Press.Google Scholar
Milner, Helen V. 1997. Interests, Institutions, and Information: Domestic Politics and International Relations. Princeton, N.J.: Princeton University Press.Google Scholar
Moravcsik, Andrew. 1997. Taking Preferences Seriously: A Liberal Theory of International Politics. International Organization 51 (4):513–53.Google Scholar
Mundell, Robert A. 1960. The Monetary Dynamics of International Adjustment Under Fixed and Flexible Exchange Rates. Quarterly Journal of Economics 74 (2):227–57.CrossRefGoogle Scholar
Mundell, Robert A. 1963. Capital Mobility and Stabilization Policy under Fixed and Flexible Exchange Rates. The Canadian Journal of Economics and Political Science 29 (4):475–85.Google Scholar
North, Douglass C. 1981. Structure and Change in Economic History. New York: Norton.Google Scholar
Oatley, Thomas. 1997. Monetary Politics: Exchange Rate Cooperation in the European Union. Ann Arbor: University of Michigan Press.Google Scholar
Odell, John S. 1982. U.S. International Monetary Policy: Markets, Power, and Ideas as Sources of Change. Princeton, N.J.: Princeton University Press.CrossRefGoogle Scholar
Olson, Mancur. 1971. The Logic of Collective Action: Public Goods and the Theory of Groups. 2d ed. Cambridge, Mass.: Harvard University Press.Google Scholar
Organization for Economic Cooperation and Development (OECD), various years. Annual National Accounts, Volume II: Detailed Tables, [diskette], Paris: OECD.Google Scholar
Przeworski, Adam, and Sprague, John. 1986. Paper Stones: A History of Electoral Socialism. Chicago: University of Chicago Press.Google Scholar
Quinn, Dennis P., and Inclan, Carla. 1997. The Origins of Financial Openness: A Study of Current and Capital Account Liberalization. American Journal of Political Science 41:771–813.Google Scholar
Rogowski, Ronald. 1987. Political Cleavages and Changing Exposure to Trade. American Political Science Review 81 (4):1121–37.CrossRefGoogle Scholar
Rose, Andrew K. 1994. Exchange Rate Volatility, Monetary Policy, and Capital Mobility: Empirical Evidence on the Holy Trinity. NBER Working Paper 4630. Cambridge, Mass.: National Bureau of Economic Research.CrossRefGoogle Scholar
Ryan, Mike H., Swanson, Carl L., and Buchholz, Rogene A.. 1987. Corporate Strategy, Public Policy and the Fortune 500: How America's Major Corporations Influence Government. New York: Basil Blackwell.Google Scholar
Silk, Leonard, and Vogel, David. 1976. Ethics and Profits. New York: Simon and Schuster.Google Scholar
Simmons, Beth A. 1999. The Internationalization of Capital. In Continuity and Change in Contemporary Capitalism, edited by Kitschelt, Herbert, Lange, Peter, Marks, Gary, and Stephens, John, 36–69. Cambridge: Cambridge University Press.Google Scholar
Stanley, Harold W., and Niemi, Richard G.. 1988. Vital Statistics on American Politics. Washington, D.C.: Congressional Quarterly Press.Google Scholar
Stockman, David A. 1986. The Triumph of Politics: How the Reagan Revolution Failed. New York: Harper & Row.Google Scholar
Underhill, Geoffrey R. D. 1991. Markets Beyond Politics?: The State and the Internationalization of Financial Markets. European Journal of Political Research 19 (2–3): 197–225.CrossRefGoogle Scholar
Visser, Jelle. 1991. Trends in Trade Union Membership. OECD Employment Outlook. 1991 (July): 97–134.Google Scholar
Watson, Alison M. S. 1997. Aspects of European Monetary Integration: The Politics of Convergence. New York: St. Martin's Press.CrossRefGoogle Scholar
Woldendrop, Jaap, Keman, Hans, and Budge, Ian, eds. 1993. Political Data 1945–1990: Party Government in 20 Democracies. European Journal of Political Research 24 (1): 1–120.Google Scholar
World Bank, various years. World Development Indicators CD-ROM. Washington, D.C.: World Bank.Google Scholar
World Bank, various years. Database of Political Institutions. Available online at ⟨http://www.worldbank.org/research/bios/pkeefer.htm⟩.Google Scholar