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Does the Fed Contribute to a Political Business Cycle?

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Author Info
Burton Abrams ()
Plamen Iossifov

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Abstract

In contrast to findings of other studies, evidence is presented to support the existence of a Federal Reserve-induced political monetary cycle that corresponds to the U.S. presidential election cycle. Using various Taylor rules, we find support for the view that Fed policy turns significantly more expansionary in the seven quarters prior to the election, but only when the Fed chair and incumbent presidential party have partisan affiliations. Copyright Springer Science+Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s11127-006-9017-0
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Publisher Info
Article provided by Springer in its journal Public Choice.

Volume (Year): 129 (2006)
Issue (Month): 3 (December)
Pages: 249-262
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Handle: RePEc:kap:pubcho:v:129:y:2006:i:3:p:249-262

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Web page: http://www.springerlink.com/link.asp?id=100332

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Faust, Jon & Irons, John S., 1999. "Money, politics and the post-war business cycle," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 61-89, February. [Downloadable!] (restricted)
  2. Price, Simon, 1997. " Political Business Cycles and Macroeconomic Credibility: A Survey," Public Choice, Springer, vol. 92(3-4), pages 407-27, September. [Downloadable!] (restricted)
  3. Athanasios Orphanides, 2003. "Historical monetary policy analysis and the Taylor rule," Finance and Economics Discussion Series 2003-36, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  4. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Blackwell Publishing, vol. 42(2), pages 169-90, April. [Downloadable!] (restricted)
  5. Blomberg, S. Brock & Hess, Gregory D., 2003. "Is the political business cycle for real?," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1091-1121, May. [Downloadable!] (restricted)
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  6. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February. [Downloadable!] (restricted)
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  7. Fair, Ray C, 1996. "Econometrics and Presidential Elections," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 89-102, Summer. [Downloadable!] (restricted)
  8. Fair, Ray C, 1978. "The Effect of Economic Events on Votes for President," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 159-73, May. [Downloadable!] (restricted)
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  9. Allen, Stuart D. & McCrickard, Donald L., 1991. "The influence of elections on federal reserve behavior," Economics Letters, Elsevier, vol. 37(1), pages 51-55, September. [Downloadable!] (restricted)
  10. Leertouwer, Erik & Maier, Philipp, 2001. "Who creates political business cycles: should central banks be blamed?," European Journal of Political Economy, Elsevier, vol. 17(3), pages 445-463, September. [Downloadable!] (restricted)
  11. John Maloney & Andrew C. Pickering & Kaddour Hadri, 2003. "Political Business Cycles and Central Bank Independence," Economic Journal, Royal Economic Society, vol. 113(486), pages C167-C181, March. [Downloadable!] (restricted)
  12. Christopher F Baum & Mark E Schaffer & Steven Stillman, 2002. "IVREG2: Stata module for extended instrumental variables/2SLS and GMM estimation," Statistical Software Components S425401, Boston College Department of Economics, revised 18 Jul 2008. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kevin Grier, 2008. "US presidential elections and real GDP growth, 1961–2004," Public Choice, Springer, vol. 135(3), pages 337-352, June. [Downloadable!] (restricted)
  2. Alpanda, Sami & Honig, Adam, 2007. "Political Monetary Cycles and a New de facto Ranking of Central Bank Independence," MPRA Paper 5898, University Library of Munich, Germany. [Downloadable!]
  3. James K. Galbraith & Olivier Giovannoni & Ann J. Russo, 2007. "The Fed's Real Reaction Function Monetary Policy, Inflation, Unemployment, Inequality-and Presidential Politics," Economics Working Paper Archive wp_511, Levy Economics Institute, The. [Downloadable!]
  4. Fabio Milani, 2007. "Political Business Cycles in the New Keynesian Model," Working Papers 070805, University of California-Irvine, Department of Economics. [Downloadable!]
  5. Ansgar Belke & Niklas Potrafke, 2009. "Does Government Ideology Matter in Monetary Policy? – A Panel Data Analysis for OECD Countries," Ruhr Economic Papers 0094, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
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