erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Public Price Controls, Deficit Financing, and Electoral Cycles

Fatih Özatay (Ankara University)

Abstract  

In this paper, first, using the Turkish data, empirical evidence for the existence of electoral manipulations in the rate of growth of public sector prices is given. It is shown that public inflation is lowered before and increased just after elections. Second, it is considered whether there is a room for maneuver for an opportunistic politician to manipulate public prices, once the impact of such price controls on public deficit is taken into consideration. It is shown that under domestic debt financing, one obtains electoral inflation cycles, whereas monetary financing does not generally permit such a manipulative policy.

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