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Timing is All: Elections and the Duration of United States Business Cycles

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  • Michael W. Klein

Abstract

Political business cycle theories predict that the occurrence and outcome of elections affect the timing of business cycle turning points. Opportunistic political business cycle theory predicts that a contraction is more likely to end soon after an election than at other times. Rational partisan political business cycle theory predicts differences in the likelihood of the end of an expansion after an election depending upon the party of newly-elected president. This paper directly tests the effect of elections on the turning points of the United States business cycle during analysis. The prediction that a contraction is more likely to end in the period before an election than in other periods is not supported by our empirical results. There is significant evidence. however. that an expansion is significantly more likely to end after the election of a Republican president but not after the election of a Democratic president in the post-World War I and post-World War II periods. This is consistent with the predictions of rational partisan political business cycle theory.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4383.

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Date of creation: Jun 1993
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Publication status: published as Journal of Money, Credit and Banking, vol. 28, no. 1, February 1996,pp. 84-101.
Handle: RePEc:nbr:nberwo:4383

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  1. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  2. 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.
  3. Alesina, Alberto & Roubini, Nouriel, 1992. "Political Cycles in OECD Economies," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(4), pages 663-88, October.
  4. Diebold, Francis X & Rudebusch, Glenn D, 1990. "A Nonparametric Investigation of Duration Dependence in the American Business Cycle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(3), pages 596-616, June.
  5. Francis X. Diebold & Glenn D. Rudebusch, 1991. "Have postwar economic fluctuations been stabilized?," Working Paper Series / Economic Activity Section, Board of Governors of the Federal Reserve System (U.S.) 116, Board of Governors of the Federal Reserve System (U.S.).
  6. Daniel E. Sichel, 1989. "Business cycle duration dependence: a parametric approach," Working Paper Series / Economic Activity Section, Board of Governors of the Federal Reserve System (U.S.) 98, Board of Governors of the Federal Reserve System (U.S.).
  7. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  8. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
  9. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 26(2), pages 646-79, June.
  10. Heckman, James J. & Singer, Burton, 1984. "Econometric duration analysis," Journal of Econometrics, Elsevier, Elsevier, vol. 24(1-2), pages 63-132.
  11. Roubini, Nouriel & Alesina, Alberto, 1992. "Political Cycles in OECD Economies," Scholarly Articles 4553025, Harvard University Department of Economics.
  12. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  13. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, Elsevier, vol. 32(2-3), pages 542-550, March.
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Cited by:
  1. Berlemann, Michael & Markwardt, Gunther, 2003. "Partisan cycles and pre-electoral uncertainty," Dresden Discussion Paper Series in Economics 01/03, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  2. K. Schoors & K. Sonin, 2003. "Passive Creditors," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 03/177, Ghent University, Faculty of Economics and Business Administration.
  3. Francis X. Diebold & Glenn D. Rudebusch, 2001. "Five questions about business cycles," Economic Review, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, pages 1-15.
  4. Block, Steven A. & Vaaler, Paul M., 2004. "The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries," Journal of International Money and Finance, Elsevier, Elsevier, vol. 23(6), pages 917-946, October.
  5. Vítor Castro, 2008. "The duration of economic expansions and recessions: More than duration dependence," NIPE Working Papers, NIPE - Universidade do Minho 18/2008, NIPE - Universidade do Minho.

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