"Laying Low" During Elections: Political Pressure and Monetary Accommodation
I present a model of political pressure on the Central Bank for higher monetary expansion. Since accommodating monetary policy is worth more to the politician in election years than non-election years, the amount of pressure differs over the electoral cycle. This induces an electoral cycle in monetary policy even though the Central Bank is independent and has no electoral motives per se. In equilibrium the monetary authority accommodates the politicians' desired policies in an election year, but is generally free from political influence in non-election years. An electoral cycle in fiscal policy may intensify the political monetary cycle, while an electoral structure that allows the government to call early elections may lessen it.