Date of Award
Doctor of Philosophy
Dr. Gunther Hega
Dr. Kevin Corder
Dr. Priscilla Lambert
Dr. Michael Ryan
Party Politics, long-term interest rates, capital mobility, monetary policy, open economies, Fixed Exchange rates
In this doctoral dissertation, I present an original political model of monetary policy in open economies that reframes the Mundell-Fleming model when party politics and long-term interest rates are examined with the three economic variables (monetary policy autonomy, capital mobility, fixed exchange rate) that form the basis of the Mundell-Fleming model. The Mundell-Fleming model explains that there is no monetary policy autonomy in the short term under high capital mobility and a fixed exchange rate system. To see whether I arrive at a different conclusion than the Mundell-Fleming model, I pose the following two research questions: 1. What explains variations in monetary policies? 2. What is the effect of political parties in power on monetary policies? These research questions are significant for political science because the questions further the debate in political science literature about whether political parties matter for monetary policies. I contribute to the debate by comparing the effect of political parties on monetary policies across a fixed exchange rate era versus a floating exchange rate era and test the three hypotheses of the dissertation with my political model of monetary policy in open economies. In my contribution, first, I review political science and economic literature to detail the debate about whether differences in monetary policies exist in a country based on left or right party in power and to provide background insights about the three hypotheses of the doctoral dissertation (concerning the effects of political parties in power, increased capital mobility, and central bank independence on monetary policies). Second, using a sample of eighteen advanced industrial democracies, I conduct a quantitative analysis of monetary policy autonomy in a fixed exchange rate period versus in a floating exchange rate period to test my hypotheses with my model. Third, I use case study research to consider the qualitative reality of the United States, a country from among the eighteen. Finally, I compare the results of the quantitative and qualitative analyses and arrived at a different conclusion than the Mundell-Fleming model. I conclude that a country may have monetary policy autonomy under high capital mobility and a fixed exchange rate system.
Unlusoy, Hulya, "Do Parties Matter? A Political Model of Monetary Policy in Open Economies" (2016). Dissertations. 1398.