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Political Cycles in OECD Economies

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  • Alesina, Alberto
  • Roubini, Nouriel

Abstract

This paper studies whether the dynamic behavior of GNP growth, unemployment, and inflation is affected by elections and changes of governments. The sample includes the last three decades in eighteen OECD economies. The authors' results are as follows: (1) the "political business cycle" hypothesis on output and employment is rejected; (2) inflation tends to increase immediately after elections; (3) they find evidence of temporary partisan differences in output and unemployment and of long-run partisan differences in the inflation rate; and (4) they find virtually no evidence of permanent partisan differences in output growth and unemployment. Copyright 1992 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 59 (1992)
Issue (Month): 4 (October)
Pages: 663-88

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Handle: RePEc:bla:restud:v:59:y:1992:i:4:p:663-88

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  1. Mankiw, N. Gregory & Campbell, John, 1987. "Permanent and Transitory Components in Macroeconomic Fluctuations," Scholarly Articles 3207697, Harvard University Department of Economics.
  2. Hsiao,Cheng, 2003. "Analysis of Panel Data," Cambridge Books, Cambridge University Press, number 9780521522717, October.
  3. Bhargava, Alok & Sargan, J D, 1983. "Estimating Dynamic Random Effects Models from Panel Data Covering Short Time Periods," Econometrica, Econometric Society, vol. 51(6), pages 1635-59, November.
  4. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  5. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  6. Steven M. Sheffrin, 1989. "Evaluating Rational Partisan Business Cycle Theory," Economics and Politics, Wiley Blackwell, vol. 1(3), pages 239-259, November.
  7. Terrones, M.E., 1989. "Macroeconomic Policy Cycles Under Alternative Electoral Structures," UWO Department of Economics Working Papers 8905, University of Western Ontario, Department of Economics.
  8. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
  9. Alesina, Alberto, 1988. "Credibility and Policy Convergence in a Two-Party System with Rational Voters," American Economic Review, American Economic Association, vol. 78(4), pages 796-805, September.
  10. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Clark, Peter K, 1987. "The Cyclical Component of U.S. Economic Activity," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 797-814, November.
  12. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  13. Ito, Takatoshi, 1990. "The timing of elections and political business cycles in Japan," Journal of Asian Economics, Elsevier, vol. 1(1), pages 135-156.
  14. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
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