IDEAS home Printed from https://ideas.repec.org/a/bin/bpeajo/v20y1989i1989-2p1-68.html
   My bibliography  Save this article

Alternative Approaches to the Political Business Cycle

Author

Listed:
  • William D. Nordhaus

    (Yale University)

Abstract

This 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • 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.
  • Handle: RePEc:bin:bpeajo:v:20:y:1989:i:1989-2:p:1-68
    as

    Download full text from publisher

    File URL: https://www.brookings.edu/wp-content/uploads/1989/06/1989b_bpea_nordhaus_alesina_schultze.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mueller, John E., 1970. "Presidential Popularity from Truman to Johnson1," American Political Science Review, Cambridge University Press, vol. 64(1), pages 18-34, March.
    2. Alberto Alesina & Alex Cukierman, 1990. "The Politics of Ambiguity," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 829-850.
    3. Frey, Bruno S & Schneider, Friedrich, 1978. "A Politico-Economic Model of the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(350), pages 243-253, June.
    4. Leroy Laney & Thomas Willett, 1983. "Presidential politics, budget deficits, and monetary policy in the United States; 1960–1976," Public Choice, Springer, vol. 40(1), pages 53-69, January.
    5. Frey, Bruno S & Schneider, Friedrich, 1978. "An Empirical Study of Politico-Economic Interaction in the United States," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 174-183, May.
    6. Wittman, Donald, 1983. "Candidate Motivation: A Synthesis of Alternative Theories," American Political Science Review, Cambridge University Press, vol. 77(1), pages 142-157, March.
    7. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    8. Alesina, Alberto & Rosenthal, Howard, 1989. "Partisan Cycles in Congressional Elections and the Macroeconomy," American Political Science Review, Cambridge University Press, vol. 83(2), pages 373-398, June.
    9. Hibbs, Douglas A., 1977. "Political Parties and Macroeconomic Policy," American Political Science Review, Cambridge University Press, vol. 71(4), pages 1467-1487, December.
    10. Fair, Ray C, 1978. "The Effect of Economic Events on Votes for President," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 159-173, May.
    11. Ordeshook,Peter C., 1986. "Game Theory and Political Theory," Cambridge Books, Cambridge University Press, number 9780521315937.
    12. MacRae, C Duncan, 1977. "A Political Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 239-263, April.
    13. Bruno S. Frey, 1978. "Keynesian Thinking in Politico-Economic Models," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 1(1), pages 71-81, October.
    14. Nathaniel Beck, 1982. "Does there exist a political business cycle: A Box-Tiao analysis," Public Choice, Springer, vol. 38(2), pages 205-209, January.
    15. Susan Lepper, 1974. "Voting behavior and aggregate policy targets," Public Choice, Springer, vol. 18(1), pages 67-81, June.
    16. Frey, Bruno S, 1974. "The Politico-Economic System: A Simulation Model," Kyklos, Wiley Blackwell, vol. 27(2), pages 227-254.
    17. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 1-16.
    18. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
    19. Wittman, Donald, 1977. "Candidates with policy preferences: A dynamic model," Journal of Economic Theory, Elsevier, vol. 14(1), pages 180-189, February.
    20. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
    21. Cukierman, Alex & Meltzer, Allan H, 1986. "A Positive Theory of Discretionary Policy, the Cost of Democratic Government and the Benefits of a Constitution," Economic Inquiry, Western Economic Association International, vol. 24(3), pages 367-388, July.
    22. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    2. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    3. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    4. Ganesh Manjhi & Meeta Keswani Mehra, 2019. "Dynamics of Political Budget Cycle," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 5(1), pages 135-158, March.
    5. Jean-Dominique Lafay & Friedrich Schneider & Werner Pommerehne, 1981. "Les interactions entre économie et politique : synthèse des analyses théoriques et empiriques," Revue Économique, Programme National Persée, vol. 32(1), pages 110-162.
    6. Alesina, Alberto Francesco, 1989. "Comments on ‘Alternative Models of Political Business Cycles’ by W.D. Nordhaus," Scholarly Articles 12553719, Harvard University Department of Economics.
    7. Price, Simon, 1997. "Political Business Cycles and Macroeconomic Credibility: A Survey," Public Choice, Springer, vol. 92(3-4), pages 407-427, September.
    8. Juan Carlos Berganza, 1998. "Relationships Between Politicians and Voters Through Elections: A Review Essay," Working Papers wp1998_9809, CEMFI.
    9. Kouvavas, Omiros, 2013. "Political Budget Cycles Revisited, the Case for Social Capital," MPRA Paper 57504, University Library of Munich, Germany, revised 15 Sep 2013.
    10. Toke S. Aidt & Francisco José Veiga & Linda Gonçalves Veiga, 2007. "Election Results and Opportunistic Policies: An Integrated Approach," NIPE Working Papers 24/2007, NIPE - Universidade do Minho.
    11. Potrafke, Niklas, 2017. "Partisan politics: The empirical evidence from OECD panel studies," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 712-750.
    12. Juan Carlos Berganza, 2000. "Politicians, voters and electoral processes: an overview," Investigaciones Economicas, Fundación SEPI, vol. 24(3), pages 501-543, September.
    13. Klein, Fabio Alvim & Sakurai, Sergio Naruhiko, 2015. "Term limits and political budget cycles at the local level: evidence from a young democracy," European Journal of Political Economy, Elsevier, vol. 37(C), pages 21-36.
    14. Toke Aidt & Francisco Veiga & Linda Veiga, 2011. "Election results and opportunistic policies: A new test of the rational political business cycle model," Public Choice, Springer, vol. 148(1), pages 21-44, July.
    15. Gebhard Kirchgässner, 2016. "Voting and Popularity," CREMA Working Paper Series 2016-08, Center for Research in Economics, Management and the Arts (CREMA).
    16. Mechtel, Mario & Potrafke, Niklas, 2009. "Political Cycles in Active Labor Market Policies," MPRA Paper 14270, University Library of Munich, Germany.
    17. Alesina, Alberto & Londregan, John & Rosenthal, Howard, 1993. "A Model of the Political Economy of the United States," American Political Science Review, Cambridge University Press, vol. 87(1), pages 12-33, March.
    18. Cesar Alberto Campos Coelho, 2004. "Elections and Governments` Behaviour - An Application to Portuguese Municipalities," NIPE Working Papers 8/2004, NIPE - Universidade do Minho.
    19. Georgios Efthyvoulou, 2012. "Political budget cycles in the European Union and the impact of political pressures," Public Choice, Springer, vol. 153(3), pages 295-327, December.
    20. Kausik Chaudhuri & Sugato Dasgupta, 2006. "The political determinants of fiscal policies in the states of India: An empirical investigation," Journal of Development Studies, Taylor & Francis Journals, vol. 42(4), pages 640-661.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bin:bpeajo:v:20:y:1989:i:1989-2:p:1-68. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/esbrous.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jennifer Ambrosino (email available below). General contact details of provider: https://edirc.repec.org/data/esbrous.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.