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How does political polarization affect the welfare of the electorate? We analyze this question using a framework in which two policy and office motivated parties compete in an infinite sequence of elections. We propose two novel measures to describe the degree of conflict among agents:antagonismis the disagreement between parties;extremismis the disagreement between each party and the representative voter. These two measures do not coincide when parties care about multiple issues. We show that forward-looking parties have an incentive to implement policies favored by the representative voter, in an attempt to constrain future challengers. This incentive grows as antagonism increases. On the other hand, extremism decreases the electorate's welfare. We discuss the methodological and empirical implications for the existing measures of political actors' ideal points and for the debate on elite polarization.

We evaluate proposals for independent fiscal authority put forward as a solution to excessive public spending. Our main conclusion is that moving the responsibility to set broad measures of fiscal policy from the hands of government to an independent fiscal council is not necessarily welfare improving. We show that the change is welfare improving if nature of uncertainty between fiscal and monetary policymakers does not change as a result. However, if this institutional change involves considerable decrease of capacity of the new agency to recognize economic shocks, citizens' welfare can decrease as a results. This is especially significant in times of increased economic volatility such as in a recent global financial crisis. Faced with the ambiguous theoretical result, we try to gain deeper insight by calibrating our simple model.

Abstract
The paper examines the ability of several alternative group decision-making models to generate proposing, voting and decision patterns matching those observed in the Bank of England's Monetary Policy Committee and the US Federal Reserve's Federal Open Market Committee. A decision-making procedure, common to all the models, is to vote between adoption of the chairman's proposal and retention of the status-quo policy, with heterogeneous votes generated by private information of the models' monetary policy committee members. The members can additionally express reservations regarding the final committee decision. The three alternative models differ in the degree of informational influence between the chairman and the remaining members. We find that a "supermajoritarian" model, in which the chairman proposes a policy she knows would be accepted by a supermajority of the committee members, combined with allowance for reservations, closely replicates real-world decision-making patterns. The model predicts no rejections of chairman's proposals, low but non-trivial dissent, even during meetings where the chairman proposes no change in policy, and predictive power of the voting record of the whole committee regarding future monetary policy changes.

We assess whether the voting records of central bank boards are informative about future monetary policy using data on five inflation targeting countries (the Czech Republic, Hungary, Poland, Sweden and the United Kingdom). We find that in all countries the voting records, namely the difference between the average voted-for and actually implemented policy rate, signal future monetary policy, making a case for publishing the records. This result holds even if we control for the financial market expectations; include the voting records from the period covering the current global financial crisis and examine the differences in timing and style of the voting record announcements.

We assess whether the voting records of central bank boards are informative about future monetary policy. First, we specify a theoretical model of central bank board decision-making and simulate the voting outcomes. Three different versions of model are estimated with simulated data: 1) democratic, 2) consensual and 3) opportunistic. These versions differ in the degree of informational influence between the chairman and other board members influence prior to the voting. The model shows that the voting pattern is informative about future monetary policy provided that the signals about the optimal policy rate are noisy and that there is sufficient independence in voting across the board members, which is in line with the democratic version. Next, the model predictions are tested on real data on five inflation targeting countries (the Czech Republic, Hungary, Poland, Sweden and the United Kingdom). Subject to various sensitivity tests, it is found that the democratic version of the model corresponds best to the real data and that in all countries the voting records are informative about future monetary policy, making a case for publishing the records.

This article surveys the theoretical literature on legislative bargaining with endogenous status-quo. These are the legislative bargaining situations in which in each period a new policy is decided and the policy implemented in the event of no agreement is endogenously determined by the outcome of bargaining in the previous period. After describing a general framework, we discus bargaining over redistributive policies, bargaining over spatial policies, existence issues, efficiency issues and open questions.