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How upside down are political business cycles when there is output persistence

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Author Info

  • Caleiro, António

Abstract

This note shows in what circumstances output persistence may invert the pattern of the political business cycle when inflation expectations are of the adaptive or rational type and the government preferences are quadratic over output and inflation.

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Bibliographic Info

Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 63 (2009)
Issue (Month): 1 (March)
Pages: 22-26

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Handle: RePEc:eee:reecon:v:63:y:2009:i:1:p:22-26

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Web page: http://www.elsevier.com/locate/inca/622941

Related research

Keywords: Output persistence Political business cycles;

References

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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper Series WP-01-08, Federal Reserve Bank of Chicago.
  2. Kiley, Michael T, 2000. "Endogenous Price Stickiness and Business Cycle Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 28-53, February.
  3. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
  4. Hafedh Bouakez & Takashi Kano, 2006. "Learning-by-Doing or Habit Formation?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 508-524, July.
  5. repec:ebl:ecbull:v:5:y:2003:i:11:p:1-8 is not listed on IDEAS
  6. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
  7. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," NBER Working Papers 5809, National Bureau of Economic Research, Inc.
  8. Wang, Peng-fei & Wen, Yi, 2006. "Another look at sticky prices and output persistence," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2533-2552, December.
  9. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
  10. Gartner, Manfred, 2000. " Political Macroeconomics: A Survey of Recent Developments," Journal of Economic Surveys, Wiley Blackwell, vol. 14(5), pages 527-61, December.
  11. Guido Ascari, 2003. "Price/Wage Staggering and Persistence: A Unifying Framework," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 511-540, 09.
  12. Gartner, Manfred, 1999. "The election cycle in the inflation bias: evidence from the G-7 countries," European Journal of Political Economy, Elsevier, vol. 15(4), pages 705-725, November.
  13. Lockwood, Ben, 1997. "State-Contingent Inflation Contracts and Unemployment Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 286-99, August.
  14. Frey, Bruno S & Ramser, Hans-Jurgen, 1976. "The Political Business Cycle: A Comment," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 553-55, October.
  15. G. Ascari & J. A. Garcia, 1999. "Relative Wage Concern: the Missing Piece in the Contract Multiplier?," DNB Staff Reports (discontinued) 32, Netherlands Central Bank.
  16. Svensson, L.E.O., 1995. "Optimal Inflation Targets, 'Conservative' Central Banks, and Linear Inflation Contracts," Papers 595, Stockholm - International Economic Studies.
  17. repec:nbr:nberre:0126 is not listed on IDEAS
  18. Gartner, Manfred, 1997. " Time-Consistent Monetary Policy under Output Persistence," Public Choice, Springer, vol. 92(3-4), pages 429-37, September.
  19. Gartner, Manfred, 1996. "Political business cycles when real activity is persistent," Journal of Macroeconomics, Elsevier, vol. 18(4), pages 679-692.
  20. Jonsson, Gunnar, 1997. "Monetary politics and unemployment persistence," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 303-325, July.
  21. Huang, Kevin X. D. & Liu, Zheng, 2002. "Staggered price-setting, staggered wage-setting, and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 405-433, March.
  22. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
  23. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  24. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  25. Gartner, Manfred, 1994. "Democracy, elections, and macroeconomic policy: Two decades of progress," European Journal of Political Economy, Elsevier, vol. 10(1), pages 85-109, May.
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Citations

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Cited by:
  1. Belbute, José & Caleiro, António, 2009. "Measuring the Persistence on Consumption in Portugal," MPRA Paper 15116, University Library of Munich, Germany.
  2. Batool, Irem & Sieg, Gernot, 2009. "Pakistan, politics and political business cycles," Economics Department Working Paper Series 7, Technische Universität Braunschweig, Economics Department.
  3. Belbute, José & Caleiro, António, 2010. "Cross Country Evidence on Consumption Persistence," MPRA Paper 22008, University Library of Munich, Germany.

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