Political parties and inflation in Greece: the metamorphosis of the Socialist Party on the way to EMU

Abstract

This paper examines the inflationary consequences of elected political parties in Greece before and after its commitment to the Single European Act (SEA). It is shown that prior to the SEA there is evidence of an inflation bias following elected Socialist governments in Greece, whereas after the SEA this bias is shown to move the opposite direction. Political wins to conservative governments are shown to have insignificant effects on inflation. With no change in the inflationary effects following conservative wins, the change of Socialists from inflationary to anti–inflationary is shown to have overturned the political partisan cycle in Greece since the SEA.