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Inflated Expectations: How government partisanship shapes bureaucrats' inflation expectations

Harvard Dataverse (Africa Rice Center, Bioversity International, CCAFS, CIAT, IFPRI, IRRI and WorldFish)

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Title Inflated Expectations: How government partisanship shapes bureaucrats' inflation expectations
 
Identifier https://doi.org/10.7910/DVN/25730
 
Creator Christopher Gandrud
Cassandra Grafstrom
 
Publisher Harvard Dataverse
 
Description Governments'™ party identifications can indicate the types of economic policies they are likely to pursue. A common rule of thumb is that left-party governments are expected to pursue policies for lower unemployment, but which may cause inflation. Right-party governments are expected to pursue lower inflation policies. How do these expectations shape the inflation forecasts of monetary policy bureaucrats? If there is a mismatch between the policies bureaucrats expect governments to implement and those that they actually do, forecasts will be systematically biased. Using US Federal Reserve Staff'™s forecasts we test for executive partisan biases. We find that irrespective of actual policy and economic conditions forecasters systematically overestimate future inflation during left-party presidencies and underestimate future inflation during right-party ones. Our findings suggest that partisan heuristics play an important part in monetary policy bureaucrats'™ inflation expectations.
 
Date 2014-05-08
 
Type csv and R source code