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Does the Fed Contribute to a Political Business Cycle?

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  • Burton Abrams

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  • Plamen Iossifov

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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Bibliographic 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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  1. Ray C. Fair, 1976. "The Effects of Economic Events on Votes for President," Cowles Foundation Discussion Papers 418, Cowles Foundation for Research in Economics, Yale University.
  2. Jon Faust & John Irons, 1996. "Money, politics and the post-war business cycle," International Finance Discussion Papers 572, Board of Governors of the Federal Reserve System (U.S.).
  3. 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.
  4. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  5. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
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  8. 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.
  9. 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.
  10. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  11. Londregan, John & Alesina, Alberto, 1993. "A Model of the Political Economy of the United States," Scholarly Articles 4552529, Harvard University Department of Economics.
  12. Ray C. Fair, 1996. "Econometrics and Presidential Elections," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 89-102, Summer.
  13. Abrams, Burton A & Butkiewicz, James L, 1995. " The Influence of State-Level Economic Conditions on the 1992 U.S. Presidential Election," Public Choice, Springer, vol. 85(1-2), pages 1-10, October.
  14. 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 02 Jan 2014.
  15. Price, Simon, 1997. " Political Business Cycles and Macroeconomic Credibility: A Survey," Public Choice, Springer, vol. 92(3-4), pages 407-27, September.
  16. 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.
  17. Grier, Kevin B., 1991. "Congressional influence on U.S. monetary policy : An empirical test," Journal of Monetary Economics, Elsevier, vol. 28(2), pages 201-220, October.
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