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We use evidence from detailed records of FOMC deliberations to argue that time inconsistency theory can help explain the excessive monetary expansion that characterized Arthur Burns's tenure as Federal Reserve Chairman (1970–1978). The records suggest that the Fed perceived a Phillips curve tradeoff and political pressures that made it difficult to adopt disinflationary policies; the tendency toward excessively expansionary policy was exacerbated by the short‐run planning horizon the Committee faced in each of its meetings. We argue that comparative static predictions of the time inconsistency model are consistent with the rise of inflation during the Burns years and its subsequent fall.

This paper provides an empirical appraisal of the influence of politics on the evolution of unemployment rates in 13 industrialized democracies (12 European Union countries & the US) from 1960 to 1999. We conduct new tests of opportunistic & partisan business cycle models, using richer data & more general specifications than previous studies. In contrast to most previous studies, we pay particular attention to the importance of labor market structure in conditioning the influence of politics on unemployment. We also investigate the relationship between political stability & economic stability. The results suggest the existence of partisan effects, with higher unemployment rates prevailing under "Right" parties than "Left" parties. There is more support for "rational" partisan models that embody transient partisan impacts than for models with permanent effects. We find evidence that union power is associated with higher average unemployment rates, but that centralized bargaining institutions tend to lower unemployment rates. The evidence also suggests that more fragmented coalition governments are associated with higher unemployment rates than single-party governments. 8 Tables, 1 Appendix, 22 References. Adapted from the source document.