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Testing the Satisficing Version of the Political Business Cycle: 1905-1984

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  • Davidson, Lawrence S
  • Fratianni, Michele
  • von Hagen, Jurgen

Abstract

This paper develops a test of the satisficing version of the political business cycle. Previous tests have focused on maximizing models of political behavior and are not sufficiently general to test for satisficing behavior. Using annual U.S. data for the period 1905 to 1984, the authors find evidence supporting the satisficing version of the political business cycle model, but they reject the maximizing version. In accordance with the satisficing hypothesis, the authors find that increasing inflation or unemployment and decreasing monetary base growth in the third year of a presidential term are followed typically by reversals during the election year. Copyright 1992 by Kluwer Academic Publishers

Suggested Citation

  • Davidson, Lawrence S & Fratianni, Michele & von Hagen, Jurgen, 1992. "Testing the Satisficing Version of the Political Business Cycle: 1905-1984," Public Choice, Springer, vol. 73(1), pages 21-35, January.
  • Handle: RePEc:kap:pubcho:v:73:y:1992:i:1:p:21-35
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    Cited by:

    1. Ghate, Chetan & Zak, Paul J., 2002. "Growth of government and the politics of fiscal policy," Structural Change and Economic Dynamics, Elsevier, vol. 13(4), pages 435-455, December.
    2. Gao, Zhifeng & House, Lisa & Bi, Xiang, 2016. "Impact of satisficing behavior in online surveys on consumer preference and welfare estimates," Food Policy, Elsevier, vol. 64(C), pages 26-36.
    3. 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.
    4. Price, Simon, 1997. "Political Business Cycles and Macroeconomic Credibility: A Survey," Public Choice, Springer, vol. 92(3-4), pages 407-427, September.
    5. von Hagen, J├╝rgen, 1998. "Budgeting institutions for aggregate fiscal discipline," ZEI Working Papers B 01-1998, University of Bonn, ZEI - Center for European Integration Studies.
    6. Kang Chen & Chang Yee Kwan, 2015. "How are Exchange Rates Managed? Evidence of an Anchor-Based Heuristic," The World Economy, Wiley Blackwell, vol. 38(6), pages 1006-1014, June.

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