Dynamic Optimization of Political Popularity in an Empirical Macroeconomic Model.

We estimate a political popularity function for Israel, taking into account the effects of institutional and political changes on the structure of the function, and then use this function, in conjunction with a simple macroeconomic model of the Israeli economy, to calculate dynamic macroeconomic strategies which would have maximized the political popularity of three previous Israel governments. We conclude that the dominant strategy was always to keep unemployment at the natural rate, but that this strategy was optimally combined with either rising inflation close to elections (for the earlier governments) or with near-zero inflation throughout the term (for later governments). Copyright 1990 by Kluwer Academic Publishers