Incumbents time stimulus to the electoral calendar rather than to economic conditions.
Nordhaus's 1975 model. Evidence is mixed in mature democracies with independent central banks, which is part of the case for independence: it removes the instrument from the electoral calendar.
In practice
- A government announces a fuel-duty freeze and a pension uprating in the spring before an autumn election, and presents both as a response to conditions.
- A finance minister who cannot set interest rates spends instead, because the instrument left to him is the one whose cost appears after the vote.
- Possible explanations
- The explanation is electoral timing: voters weight recent conditions heavily, so an incumbent who can move the instruments has an incentive to produce good conditions shortly before a vote and bear the cost afterwards.
- In its favour
- The incentive is clear, and pre-election fiscal loosening is documented in many countries, particularly where the executive controls spending directly.
- Against it
- Evidence for systematic monetary manipulation is mixed in mature democracies with independent central banks, which is part of the case for independence, and the pattern is much weaker where the instruments are outside political control.
- Standing
- Evidence for systematic pre-election manipulation is mixed and varies with institutions and central bank independence.
- Subject
- Law & Politics
- Essay
- Competing accounts of how power works