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Is the political business cycle for real?

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  • S. Brock Blomberg
  • Gregory D. Hess

Abstract

This paper's macroeconomic model combines features from both real and political business cycle models. It augments a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities: First, that on average the economy expands early under Democratic presidents and contracts early under Republican presidents. Second, that presidents whose parties successfully retain the presidency have stronger-than-average growth in the second half of their terms. The model generates both of these features in conformity with U.S. post-World War II data.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0016.

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Date of creation: 2000
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Handle: RePEc:fip:fedcwp:0016

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Keywords: Business cycles;

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Citations

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Cited by:
  1. Claudiu-Gabriel Tiganas & Claudiu Peptine, 2012. "Political Business Cycle And Economic Instability - Literature Review," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4, pages 853-865, December.
  2. Bjørnskov, Christian & Potrafke, Niklas, 2013. "The size and scope of government in the US states: Does party ideology matter?," Munich Reprints in Economics 20275, University of Munich, Department of Economics.
  3. Christian Bj�rnskov & Niklas Potrafke, 2012. "Political Ideology and Economic Freedom Across Canadian Provinces," Eastern Economic Journal, Palgrave Macmillan, vol. 38(2), pages 143-166.
  4. Blomberg, S. Brock, 2000. "Modeling political change with a regime-switching model," European Journal of Political Economy, Elsevier, vol. 16(4), pages 739-762, November.
  5. Burton Abrams & Plamen Iossifov, 2006. "Does the Fed Contribute to a Political Business Cycle?," Public Choice, Springer, vol. 129(3), pages 249-262, December.
  6. Robert Grafstein & Kiki Caruson, 2008. "Surprise party," Public Choice, Springer, vol. 137(1), pages 315-328, October.
  7. Kim, Iljoong & Kim, Inbae, 2008. "Interest group pressure explanations for the yen-dollar exchange rate movements: Focusing on the 1980s," Journal of the Japanese and International Economies, Elsevier, vol. 22(3), pages 364-382, September.
  8. Gernot Sieg & Irem Batool, 2012. "Pakistan, Politics and Political Business Cycles," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(2), pages 153-166.
  9. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers 10-10, Carleton University, Department of Economics.

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