Abstract: Numerous studies carried out in the developed
western democratic countries have shown that the ideological
framework of the governing party has a significant influence on the
monetary policy. The executive authority consisting of a left-wing
party gives a higher weight to unemployment suppression and central
bank implements a more expansionary monetary policy. On the other
hand, right-wing governing party considers the monetary stability to
be more important than unemployment suppression and in such a
political framework the main macroeconomic objective becomes the
inflation rate reduction. The political framework conditions in the
transition countries which are new European Union (EU) members
are still highly specific in relation to the other EU member countries.
In the focus of this paper is the question whether the same
monetary policy principles are valid in these transitional countries as
well as they apply in developed western democratic EU member
countries. The data base consists of inflation rate and unemployment
rate for 11 transitional EU member countries covering the period
from 2001 to 2012. The essential information for each of these 11
countries and for each year of the observed period is right or left
political orientation of the ruling party.
In this paper we use t-statistics to test our hypothesis that there are
differences in inflation and unemployment between right and left
political orientation of the governing party. To explore the influence
of different countries, through years and different political
orientations descriptive statistics is used. Inflation and unemployment
should be strongly negatively correlated through time, which is tested
using Pearson correlation coefficient.
Regarding the fact whether the governing authority is consisted
from left or right politically oriented parties, monetary authorities
will adjust its policy setting the higher priority on lower inflation or
unemployment reduction.