Shanker Satyanath and Arvind Subramanian
IMF Staff Papers, 54(3).
The Political Economy of Normal Macroeconomic Pathologies.
Recognizing that inflation and the macroeconomic policies that affect it can emanate from distributional conflicts in society, we examine the deep determinants of several nominal pathologies and related policy variables from a distributional perspective. We develop new instruments and use well- established existing instruments for these deep determinants and find that two deep determinants—societal divisions and democratic institutions—have a powerful and robust causal impact on nominal macroeconomic outcomes . . .