Political macroeconomics: A survey of recent developments

The paper surveys political macroeconomics, covering its development from R ogoff's conservative central banker to the most recent discussions of monet ary policy and institutional design. Topics include the inflation-stabiliza tion trade-off, central bank independence with escape clauses and overrulin g with costs, inflation targets, performance contracts for monetary authori ties, and the consequences of output persistence for these issues. Further topics are the political business cycle when output is persistent, the poli tical macroeconomics of fiscal policy, the government spending bias, and th e game-theoretic interaction between fiscal and monetary policy. All work i s discussed within a coherent analytical framework.