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The Partisan Model Of Macroeconomic Cycles: More Theory And Evidence For The United States

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  • DOUGLAS A. HIBBS

Abstract

The "Partisan Theory" of macroeconomic policy is based on the idea that political parties typically weight nominal and real economic performance differently, with left-party governments being more inclined than right-party ones to pursue expansive policies designed to yield lower unemployment and higher growth, but running the risk of extra inflation. Given suitable assumptions about the structure of the macroeconomy, partisan models imply a political signal in demand management, output and inflation movements originating with shifts in party control of the government. In this paper I develop and test with postwar US data a revised Partisan model that allows for (i) uncertainty among policy authorities about the sustainable output growth rate and therefore about how aggregate demand expansions will be partitioned between extra output and extra inflation, and (ii) ex-post and projective learning and preference adjustment under such uncertainty. Dynamic numerical analysis of a small, stylized political-economic model based on these extensions of Partisan Theory generates within-sample forecasts that correspond remarkably well to the observed pattern of price, output and nominal spending fluctuations under the parties. Copyright 1994 Blackwell Publishers Ltd..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Economics & Politics.

Volume (Year): 6 (1994)
Issue (Month): 1 (03)
Pages: 1-23

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Handle: RePEc:bla:ecopol:v:6:y:1994:i:1:p:1-23

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985

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Cited by:
  1. Ozkan, F Gulcin, 1998. "Partisan Business and Budget Cycles with Separate Fiscal and Monetary Authorities," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(2), pages 178-95, March.
  2. Gabriel Rodríguez & Alfredo Vargas, 2012. "Impacto de expectativas políticas en los retornos del Índice General de la Bolsa de Valores de Lima," Revista Economía, Departamento de Economía - Pontificia Universidad Católica del Perú, vol. 35(70), pages 190-223.
  3. Cem Karayalcin & Mehmet A. Ulubasoglu, 2005. "State Owned Enterprises and Redistribution: An Empirical Analysis," Working Papers 0511, Florida International University, Department of Economics.
  4. Acocella N. & Di Bartolomeo G., 2001. "Partisanship and fiscal policy co-ordination in a monetary union," Working Papers 2001013, University of Antwerp, Faculty of Applied Economics.
  5. Veysel Avsar & Cem Karayalcin & Mehmet Ali Ulubasoglu, 2009. "State-Owned Enterprises, Political Ideology, and Redistribution," Economics Series 2009_09, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  6. Wilko Letterie & Otto Swank, 1997. "Electoral and partisan cycles between US economic performance and presidential popularity: a comment on Stephen E. Haynes," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1585-1592.
  7. Osterloh, Steffen, 2010. "Words speak louder than actions: The impact of politics on economic performance," ZEW Discussion Papers 10-092, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Stefan Krause & Fabio Méndez, 2005. "Policy Makers' Preferences, Party Ideology, and the Political Business Cycle," Southern Economic Journal, Southern Economic Association, vol. 71(4), pages 752-767, April.
  9. Belke, Ansgar, 2000. " Partisan Political Business Cycles in the German Labour Market? Empirical Tests in the Light of the Lucas-Critique," Public Choice, Springer, vol. 104(3-4), pages 225-83, September.
  10. Swank, Otto H., 1998. "Partisan Policies, Macroeconomic Performance and Political Support," Journal of Macroeconomics, Elsevier, vol. 20(2), pages 367-386, April.
  11. Fabrizio Carmignani, 2003. "Political Instability, Uncertainty and Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 1-54, February.
  12. James Cooley, 2009. "Stock Market Returns and Partisan Political Business Cycles," Departmental Working Papers 0902, Southern Methodist University, Department of Economics.
  13. Ozkan, F Gulcin, 2000. " Who Wants an Independent Central Bank? Monetary Policy-Making and Politics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(4), pages 621-43, December.
  14. Bruno S. Frey, 2011. "Political Economy: Success or Failure?," CESifo Working Paper Series 3684, CESifo Group Munich.
  15. Schmidt, Manfred G., 2001. "Parteien und Staatstätigkeit," Working papers of the ZeS 02/2001, University of Bremen, Centre for Social Policy Research (ZeS).
  16. Vuchelen, Jef, 1995. "Political events and consumer confidence in Belgium," Journal of Economic Psychology, Elsevier, vol. 16(4), pages 563-579, December.

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