Structure of governments and inflation in CEE countries

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
Technická Univerzita v Liberci
Technical university of Liberec, Czech Republic
This paper deals with the political-economic relationships of the coalition governments in the countries of Central and Eastern Europe. The added value of this paper is in its approach to testing the relationship of the political and economic characteristics in the whole region of Central and Eastern Europe, especially for coalition governments. This approach has rarely been applied in recent literature. We used panel regression with fixed effect. Data revealed that the level of the incumbent government's majority in parliament is statistically significant and that the estimates showed a tendency of inflation to decrease by 0.22 pp in the case when the majority of the coalition increases by 1 percent. Single-party government and government with a minimal winning coalition (all parties in the government are necessary to form a majority in parliament) statistically significantly influenced the inflation even more and in comparison with other types of government, decrease the inflation by approximately 3 pp. There were also statistically significant estimates for public expenditure and economic growth. The inflation estimate increased in the case of an increase in public expenditure or an increase in economic growth in Central and Eastern European Countries. Both relationships are predictable using economic principles. The number of political parties did not appear statistically significant in any of the tested models. The same situation appeared in the case of the variable concerning the prime minister belonging to the strongest political party in the coalition government. Text was prepared under the support of IP 100040, institutional project of University of Economics, Prague.
coalition governments, Central and Eastern European countries, economic policy, inflation monetary policy, panel data, government ideology