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Polarized business cycles

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  • Azzimonti, Marina
  • Talbert, Matthew

Abstract

Four stylized facts motivate this paper: (i) business cycle movements are wider in emerging countries (EC) than in developed ones; (ii) EC experience greater economic policy uncertainty; (iii) EC are more polarized and less politically stable; and (iv) EPU is positively related to political polarization. A standard real business cycle model augmented to incorporate political polarization, a ‘polarized business cycle’ (PBC) model, is shown to be consistent with these facts. We first derive our results analytically, and then quantify the effects of a permanent increase in polarization to the US economy.

Suggested Citation

  • Azzimonti, Marina & Talbert, Matthew, 2014. "Polarized business cycles," Journal of Monetary Economics, Elsevier, vol. 67(C), pages 47-61.
  • Handle: RePEc:eee:moneco:v:67:y:2014:i:c:p:47-61
    DOI: 10.1016/j.jmoneco.2014.07.001
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    Citations

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    Cited by:

    1. Grechyna, Daryna, 2015. "On Determinants of Political Polarization," MPRA Paper 67611, University Library of Munich, Germany.
    2. Grechyna, Daryna, 2016. "On the determinants of political polarization," Economics Letters, Elsevier, vol. 144(C), pages 10-14.
    3. repec:eee:moneco:v:93:y:2018:i:c:p:114-131 is not listed on IDEAS
    4. Marina Azzimonti, 2015. "The dynamics of public investment under persistent electoral advantage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 653-678, July.
    5. Ellen McGrattan, 2016. "Intangible Capital and Measured Productivity," 2016 Meeting Papers 62, Society for Economic Dynamics.
    6. Funke, Manuel & Schularick, Moritz & Trebesch, Christoph, 2016. "Going to extremes: Politics after financial crises, 1870–2014," European Economic Review, Elsevier, vol. 88(C), pages 227-260.
    7. repec:wly:iecrev:v:59:y:2018:i:2:p:479-510 is not listed on IDEAS
    8. Marina Azzimonti, 2018. "The Politics Of Fdi Expropriation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(2), pages 479-510, May.
    9. Grechyna, Daryna, 2017. "Public Policy Against Political Frictions," MPRA Paper 76396, University Library of Munich, Germany.
    10. Grechyna, Daryna, 2016. "Political frictions and public policy outcomes," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 484-495.
    11. Marina Azzimonti, 2015. "The dynamics of public investment under persistent electoral advantage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 653-678, July.
    12. Cheng, Chak Hung Jack & Hankins, William B. & Chiu, Ching-Wai (Jeremy), 2016. "Does US partisan conflict matter for the Euro area?," Economics Letters, Elsevier, vol. 138(C), pages 64-67.
    13. Azzimonti, Marina, 2018. "Partisan conflict and private investment," Journal of Monetary Economics, Elsevier, vol. 93(C), pages 114-131.
    14. Grechyna, Daryna, 2016. "The Structure of Government Spending and the Business Cycle," MPRA Paper 72029, University Library of Munich, Germany.
    15. repec:eee:ecolet:v:158:y:2017:i:c:p:47-50 is not listed on IDEAS
    16. Mickael Melki & Andrew Pickering, 2016. "Polarization and Corruption in America," Discussion Papers 16/09, Department of Economics, University of York.
    17. repec:eee:pubeco:v:164:y:2018:i:c:p:225-240 is not listed on IDEAS
    18. Grechyna, Daryna, 2017. "Mandatory Spending, Political Polarization, and Macroeconomic Volatility," MPRA Paper 83452, University Library of Munich, Germany.
    19. repec:bla:kyklos:v:71:y:2018:i:4:p:581-612 is not listed on IDEAS
    20. Grechyna, Daryna, 2017. "Political Instability: The Neighbor vs. the Partner Effect," MPRA Paper 79952, University Library of Munich, Germany.
    21. Marina Azzimonti, 2016. "Does Partisan Conflict Deter FDI Inflows to the US?," NBER Working Papers 22336, National Bureau of Economic Research, Inc.

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