The African Financial Review July-August 2014 | Page 31

critics that we will advance towards median voter thesis will
provide a further justification for our purpose, namely that
democracy is an effective instrument in reducing inflation.

The third section will be a theoretical support of the above
statements; by presenting a review of the literature that have
addressed this issue. As for the second part of our study, it will be

Popular demand for public goods and services
financed by money creation, the uncertainty of
results of stabilization policies, and the slow
materialization of these results make it difficult
to control inflation in democratically developed
countries.
an empirical validation to our purpose. Following an econometric
framework, made on a heterogeneous sample of countries and a
sample consisting only of developing countries and for the period
1996- 2012, we show that democracy is statistically significant
in reducing inflation in both samples.

This empirical study will however be preceded by a
presentation of the index of measure of democracy that we use
to quantify our variable of interest, that is the index of Kaufmann
(2012). We assume that this index provides an exhaustive
conceptualization of the concept of democracy.

A critical analysis of the ‘median voter’ thesis:
Tunisia case study

According to the median voter theory, the popular demand
for public goods and services financed by money creation, the
uncertainty of the results of stabilization policies, and the slow
materialization of these results make it difficult the control
of inflation in democratic development countries. Indeed, in
development countries, where the majority of citizens do not
have access to the basic public goods and services (school, health,
water, etc) and where the governments have limited resources
to finance their expenditures, the median voter would express a
high demand for public goods during the elections. Democratic
governments are likely to mainly finance these public goods by
money creation in order to ensure their maintenances in power.
In the same way, the uncertainty of the results of stabilization
policies and the slow materialization of these results, in terms of
economic growth would reduce the prefer V