Political Parties and the Business Cycle in the United States, 1948-1984
AbstractThis paper tests the existence and the extent of a politically induced business cycle in the U.S. in the post-World War II period. The cycle described in this paper is different from the traditional "political business cycle" of Nordhaus. It is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts. From an explicit optimization problem we derive a system of equations for output and money growth. Then we successfully test the non-linear restriction imposed by the theory on the parameters of the system of equations. We cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1940.
Date of creation: May 1986
Date of revision:
Publication status: published as Alesina, Alberto and Jeffrey Sachs, "Political Parties and the Business Cycle in the United States, 1948-1984." Journal of Money Credit and Banking, Vol. 20, No. 1, February 1988, pp. 63-82.
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Other versions of this item:
- Alesina, Alberto & Sachs, Jeffrey, 1988. "Political Parties and the Business Cycle in the United States, 1948-1984," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 20(1), pages 63-82, February.
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"Unanticipated Money, Output, and the Price Level in the United States,"
Scholarly Articles, Harvard University Department of Economics
3450988, Harvard University Department of Economics.
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- Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(3), pages 651-78, August.
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- Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(2), pages 169-90, April.
- repec:nbr:nberre:0126 is not listed on IDEAS
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(3), pages 473-91, June.
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