Alternative Approaches to the Political Business Cycle
AbstractThis paper reviews the theory and evidence concerning Political Business Cycles (PBC), which are based on the obvious facts of democratic life that voters care about the economy while politicians care about power. The first section provides an overview of different approaches to political cycles, describing five models that have been used in different contexts. The next two sections review major theoretical issues, with attention to the "microfoundations" of politico-economic systems, an exploration of the implications of ideological parties for political equilibria, and a formal analysis of a number of different PBC models. The empirical sections begin with an analysis of two important empirical questions in PCB models: whether voters are ultrarational and whether parties are ideological or opportunistic. The final section then examines historical and econometric evidence to determine the importance of political cycles in macroeconomic activity.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 927.
Length: 83 pages
Date of creation: Oct 1989
Date of revision:
Publication status: Published in Brookings Papers on Economic Activity (1989), 2: 1-68
Note: CFP 748.
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Other versions of this item:
- William D. Nordhaus, 1989. "Alternative Approaches to the Political Business Cycle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(2), pages 1-68.
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