Political Accountability and the Room to Maneuver
Thomas SattlerETH Zurich
John FreemanUniversity of Minnesota
Patrick T. BrandtUniversity of Texas, Dallas
Meeting of the International Political Economy Society, Princeton, November 17-18, 2006
Introduction
• Most political scientists now agree that governments retain significant room to maneuver in a globalized economy.
• They assume rather than demonstrate that citizens are satisfied with policy choices and economic outcomes, i.e. political accountability exists in open democracies.
• We examine how much, if any, room to maneuver democratic governments actually retain.
• Political scientists demonstrate the importance of economic outcomes for political approval.
• Economists analyze effects of economic policy with no provisions of accountability.
• Both ignore the endogenous relationship between the polity and the economy.
Critique
A Genuine Political Economy Framework
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Method: Bayesian Structural VAR
Sample: United Kingdom 1981:11-1997:4, monthly
Variables are in Three Groups
Polity: Vote Intentions (VI); Prime Minister Approval (PA); Personal/Sociotropic Economic Expectations (PE/SE); Exogenous Electoral Counter
Policy: Domestic and Foreign Interest Rates (IR and USIR)
Economy: Domestic and Foreign CPI and Output (CPI and USCPI; IIP and USIIP); $/£ Exchange Rate (XR)
Method and Data
Posterior Model Fit Summaries for B-SVAR models
Model Fit
Model LogMDD
Bayes factorv.No
Accountability
Bayes factorv.
PolicyResponse
NoAccountability
8419
PolicyResponse
8432 13
Accountability 8478 59 46
UK Interest Rate Response to Politics
Political Responses to Exchange Rate and Interest Rate Shocks
Domestic Real Economy Responses to Policy Shocks
Political Responses to Real Economic Shocks
Electoral Counter Densities
• The accountability mechanism that we found works outside the real economy.
• Government capacity to shape real economic outcomes was limited in Britain from 1981 to 1997.
• Work in Progress: Analysis including British fiscal policy over the longer period to 2005:
- Which role does fiscal policy play for political accountability?
- How does delegation of monetary policy to the Bank of England in 1997 affect the government capacity to cope with globalization?
Conclusion
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