William Roberts Clark

Rehabilitating Duverger’s Theory Testing the Mechanical and Strategic Modifying Effects of Electoral Laws

Although Duverger is traditionally seen as synonymous with the institution-list approach to party systems, this article shows that he believed social pressures were the driving force behind the multiplication of parties. Electoral institutions are important, but only because they determine the extent to which social forces are translated into political parties. Although the literature has finally come to realize that social and institutional forces interact to shape party systems, scholars still do not seem to fully understood the implications of Duverger’s theory. This article shows that existing research employs flawed statistical specifications, makes inferential errors, and does not calculate desired quantities of interest. Using a new data set that includes elections since 1946, the authors reexamine Duverger’s theory and find that modern tests largely bear out his expectations when properly specified and interpreted. This analysis also extends current research by specifically estimating the mechanical and strategic modifying effects of electoral institutions.

Mobile Capital, Domestic Institutions, and Electorally Induced Monetary and Fiscal Policy

The literature on global integration and national policy autonomy often ignores a central result from open economy macroeconomics: Capital mobility constrains monetary policy when the exchange rate is fixed and fiscal policy when the exchange rate is flexible. Similarly, examinations of the electoral determinants of monetary and fiscal policy typically ignore international pressures altogether. We develop a formal model to analyze the interaction between fiscal and monetary policymakers under various exchange rate regimes and the degrees of central bank independence. We test the model using data from OECD countries. We find evidence that preelectoral monetary expansions occur only when the exchange rate is flexible and central bank independence is low; preelectoral fiscal expansions occur when the exchange rate is fixed. We then explore the implications of our model for arguments that emphasize the partisan sources of macroeconomic policy and for the conduct of fiscal policy after economic and monetary union in Europe.

International and Domestic Constraints on Political Business Cycles in OECD Economies

The effect of increased capital mobility on the national control of macroeconomic policy continues to be a topic of debate. Empirical contributions to this debate share the assumption that domestic macroeconomic policy is driven by either partisan or countercyclical motivations, and that the effects of international financial flows have roughly similar effects in all countries. This article reevaluates the integration hypothesis in a framework in which manipulations of the macroeconomy derive from opportunistic motivations. The article emphasizes the ways in which prior institutional choices effect the way these motivations are translated into actions. Evidence from individual country and pooled time-series tests suggests that opportunistic cycles are less likely to occur when (1) a government maintains a fixed exchange rate in the presence of highly mobile capital or (2) when the central bank enjoys above-average independence.

Political Business Cycles in EU Accession Countries

This paper considers whether political business cycles existed in East European accession countries during the period 1990-9. Based on the Mundell-Fleming model expanded in Clark and Hallerberg (2000), we argue that the type of exchange rate regime and the relative independence of the central bank affects the instruments governments use to influence the economy before elections. In our empirical analysis, we find that accession countries with dependent central banks and flexible exchange rates have looser monetary policies in electoral periods than in non-electoral periods. If a country has a fixed exchange rate regime, it manipulates its economy in election years through running larger budgets instead of through looser monetary policy. The presence of such cycles in Eastern Europe has implications for the introduction of the euro in EU accession countries.

Agents and Structures: Two Views of Preferences, Two Views of Institutions

Two analytically distinct approaches to the study of domestic politics have been referred to as the “new institutionalism.” The fundamental difference between the two brands of institutionalism can be seen in the way they handle the relationship between “agents” and “structures.”“Structure-based” approaches to institutions give ontological primacy to structures and view agents as being constituted by them. “Agency-centered” approaches view human agents as ontologically primitive and view institutions as structures that are created by goal-maximizing individuals. The two approaches are compared, with special attention given to the way they treat the preferences that actors hold. I argue that contrary to arguments made by many structure-based theorists, the agency-centered approach is capable of contributing to discussions regarding the sources of actor preferences. A limited information model of the strategic interaction between workers and capitalists is used to demonstrate ways in which the agency-centered approach can begin to make preferences endogenous.

Partisan and Electoral Motivations and the Choice of Monetary Institutions Under Fully Mobile Capital

Central bank independence and pegged exchange rates have each been viewed as solutions to the inflationary bias resulting from the time inconsistency of discretionary monetary policy. While it is obvious that a benevolent social planner would opt for such an institutional solution, it is less obvious that a real-world incumbent facing short-term partisan or electoral pressures would do so. In this article, I model the choice of monetary institutions from the standpoint of a survival-maximizing incumbent. It turns out that a wide range of survival-maximizing incumbents do best by forfeiting control over monetary policy. While political pressures do not, in general, discourage monetary commitments, they can influence the choice between fixed exchange rates and central bank independence. I highlight the importance of viewing fiscal policy and monetary policy as substitutes and identify the conditions under which survival-maximizing incumbents will view fixed exchange rates and central bank independence as substitutes. In so doing, I provide a framework for integrating other contributions to this volume.

Fiscal Policy and the Democratic Process in the European Union

The construction of a monetary union with a single currency in Europe raises serious concerns for those who understand the democratic process as one in which social groups compete on different ideological programs. This is because it increasingly constrains national governments of different partisan hues to follow similar fiscal and monetary policies. Recent empirical studies indicate that these concerns might be somewhat misplaced since there is evidence that partisan convergence on macroeconomic policy predates these institutional developments. One problem with these studies, though, is that they fail to include the electoral system as a constraint on partisan behavior. Since electoral systems generate centripetal and centrifugal tendencies, we should expect to find strong evidence for partisan differences only where electoral rules encourage dispersion. We test this argument using data on fiscal policy from European Union countries between 1981 and 1992. We find that there is still no systematic evidence for partisan differences. Given this, it is hard to see how EMU can add to the democratic deficit in the European Union.

Independent but Not Indifferent: Partisan Bias in Monetary Policy at the Fed

Independent central banks are thought to be effective inflation hawks because they are run by technocrats with conservative monetary policy preferences. However, central bankers can only protect their independence by compromising with the elected officials who grant them their independence. Policy, therefore, is likely to be a weighted average of the preferences of the central bank and the government. Consequently, central bankers may be eager to help right�?wing governments stay in power and oppose the election of left�?wing governments. We show evidence from the United States that interest rates (a) decline as elections approach when Republicans control the White House, but rise when Democrats do; and (b) are sensitive to the inflation rate (output gap) when Democrats (Republicans) are in the White House. Thus, the Federal Reserve is a conditional inflation hawk. Since the Fed became operationally independent in 1951, the Republicans have exhibited a decided electoral advantage in presidential politics.

Measures of financial openness and interdependence

Purpose - The purpose of this paper is to review concepts and measurements related to financial globalization such as financial openness, financial integration, monetary interdependence, and the mobility and movement of capital. Design/methodology/approach - This paper surveys the theoretical and empirical literature on monetary interdependence and financial globalization. The major ways in which these concepts are measured empirically are presented and critiqued. Findings - Disagreements about the degree of financial integration and capital mobility are, in part, explained by the different approaches to measuring these concepts. One major challenge in obtaining a good measures is controlling for other major factors that may influence observed correlations among financial variables. While these relationships still cannot be estimated precisely, it can be safely said that while high for many countries, few if any financial markets are perfectly integrated across countries. Originality/value - By offering a comprehensive analysis of these different measurements, the paper underscores the different implications for national policies and the operation of the international monetary system of different dimensions of globalization. In particular, the proposition that financial globalization has left most countries with little autonomy for domestic monetary policy is subject to serious debate, at least in the short run.

The British Academy Brian Barry Prize Essay: An Exit, Voice and Loyalty Model of Politics

Political scientists typically develop different models to examine distinct political phenomena such as lobbying, protests, elections and conflict. These specific models can provide important insights into a particular event, process or outcome of interest. This article takes a different tack. Rather than focus on the specificities of a given political phenomenon, this study constructs a model that captures the key elements common to most political situations. This model represents a reformulation and extension of Albert Hirschman’s famous Exit, Voice and Loyalty framework. To highlight the value that comes from focusing on the commonalities that exist across apparently disparate political phenomena, the article applies the model to several issues in the democratization literature related to modernization theory, the political resource curse, inequality, foreign aid and economic performance.