Political price cycles in regulated industries
Subtitle: theory and evidence
By: prepared by Claudio Paiva and Rodrigo Moita.
Contributors: Moita, Rodrigo.; International Monetary Fund. Western Hemisphere Dept.
Series: IMF working paper -- WP/06/260
Publisher: International Monetary Fund, Western Hemisphere Dept.
Published: 2006
Place of publication: [Washington, D.C.]
Language: eng
Number of pages: 22
Subjects: Price regulation -- Political aspects.; Petroleum products -- Prices -- Political aspects.
Description: This paper develops a model of political regulation in which politicians set the regulated price in order to maximize electoral support by signaling to voters a pro-consumer behavior. Political incentives and welfare constraints interact in the model, yielding an equilibrium in which the real price in a regulated industry may fall in periods immediately preceding an election. The paper also provides empirical support for the theoretical model. Using quarterly data from 32 industrial and developing countries over 1978-2004, we find strong statistical and econometric evidence pointing toward the existence of electoral price cycles in gasoline markets.
Notes: Caption title.

"November 2006."

Includes bibliographical references (p. 22).

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