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Activist Macroeconomic Policy, Election Effects and the Formation of Expectations: Evidence from OECD Economies


  • David Kiefer


We examine the explanatory power of a political-business cycle theory in which governments practice short-run policy to lessen the impact of exogenous shocks. Governments have ideological objectives with respect to macroeconomic performance, but are constrained by an augmented Phillips curve. The most prominent version, the rational partisan model, incorporates forward-looking expectations. This model can be compared to a competing model based on backward-looking expectations. Alesina and Roubini's recent advocacy of the rational model uses OECD data. Our reconsideration of the same data, updated to 1995, suggests that the adaptive expectations version offers a better explanation than the rational one. Copyright Blackwell Publishers Ltd 2000.

Suggested Citation

  • David Kiefer, 2000. "Activist Macroeconomic Policy, Election Effects and the Formation of Expectations: Evidence from OECD Economies," Economics and Politics, Wiley Blackwell, vol. 12(2), pages 137-154, July.
  • Handle: RePEc:bla:ecopol:v:12:y:2000:i:2:p:137-154

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    References listed on IDEAS

    1. Cameron, L. & Crosby, M., 1999. "It's the Economy Stupid?," Department of Economics - Working Papers Series 699, The University of Melbourne.
    2. 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.
    3. Andrew Leigh, 2005. "Deriving Long-Run Inequality Series from Tax Data," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages 58-70, August.
    4. Dustmann, Christian & Preston, Ian, 2001. "Attitudes to Ethic Minorities, Ethnic Context and Location Decisions," Economic Journal, Royal Economic Society, vol. 111(470), pages 353-373, April.
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    Cited by:

    1. Ferré, Montserrat & Manzano, Carolina, 2014. "Rational Partisan Theory with fiscal policy and an independent central bank," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 27-37.
    2. Elias Sanidas, 2014. "The Greek Non-Paradigm of Economic and Business Development, and Comparisons with South Korea," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 64(3), pages 30-48, July-Sept.
    3. Kiefer, David, 2015. "Targets and lags in a two-equation model of US stabilization," Economic Modelling, Elsevier, vol. 44(C), pages 18-24.
    4. Berlemann, Michael & Markwardt, Gunther, 2006. "Variable rational partisan cycles and electoral uncertainty," European Journal of Political Economy, Elsevier, vol. 22(4), pages 874-886, December.

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