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Causality In Political Business Cycles

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  • CHRISTOPHER J. ELLIS
  • MARK A. THOMA

Abstract

One can easily identify four general models of political business cycles: office-motivated models (both forward and backward looking) and partisan models (again, both forward and backward looking). Each model makes different assumptions about the direction and timing of causal links between the economy and polity. This paper uses Granger causality tests to investigate the causal links between presidential popularity and different measures of aggregate economic performance and aggregate economic policy. The paper's aim is to investigate whether any existing theories receive substantive support and, if not, to suggest the properties that any new theories should display. The results indicate no overwhelming support for any existing theories, though partisan models receive more support than do office-motivated models. The data appear to be most consistent with Ellis and Thoma's reputational partisan model. Copyright 1991 Western Economic Association International.

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  • Christopher J. Ellis & Mark A. Thoma, 1991. "Causality In Political Business Cycles," Contemporary Economic Policy, Western Economic Association International, vol. 9(1), pages 39-49, January.
  • Handle: RePEc:bla:coecpo:v:9:y:1991:i:1:p:39-49
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    References listed on IDEAS

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    1. 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.
    2. repec:cup:apsrev:v:71:y:1977:i:04:p:1467-1487_26 is not listed on IDEAS
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. 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.
    5. Haynes, Stephen E & Stone, Joe A, 1990. "Political Models of the Business Cycle Should Be Revived," Economic Inquiry, Western Economic Association International, vol. 28(3), pages 442-465, July.
    6. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 1-16.
    7. Stock, James H. & Watson, Mark W., 1989. "Interpreting the evidence on money-income causality," Journal of Econometrics, Elsevier, vol. 40(1), pages 161-181, January.
    8. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
    9. Alberto Alesina, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, Oxford University Press, vol. 102(3), pages 651-678.
    10. Terrones, M.E., 1989. "Macroeconomic Policy Cycles Under Alternative Electoral Structures," UWO Department of Economics Working Papers 8905, University of Western Ontario, Department of Economics.
    11. Havrilesky, Thomas M, 1987. "A Partisanship Theory of Fiscal and Monetary Regimes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(3), pages 308-325, August.
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    Cited by:

    1. Faust, Jon & Irons, John S., 1999. "Money, politics and the post-war business cycle," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 61-89, February.
    2. Jon Faust & John S. Irons, 1996. "Money, politics and the post-war business cycle," International Finance Discussion Papers 572, Board of Governors of the Federal Reserve System (U.S.).

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