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Reelection or term limits? The short and the long run view of economic policy

An incumbent's drive for reelection can lead to political budget cycles. The distortion cycles cause in economic policy may be offset by the information they indirectly provide about the incumbent's competency. The informative content of cycles depends on the sophistication of voters, i.e. on whether they are rational or near rational. In a framework of individual candidates, constitutional clauses that prohibit the reelection of the president eliminate political budget cycles. One-term limits that allow non-immediate reelection also shift the focus from short-run cycles to the long-run soundness of economic policies, and have superior welfare properties. Hence, the choice is not reelection or not, but rather immediate or non-immediate reelection.

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Article provided by University of Chile, Department of Economics in its journal Estudios de Economia.

Volume (Year): 26 (1999)
Issue (Month): 2 Year 1999 (December)
Pages: 187-206

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Handle: RePEc:udc:esteco:v:26:y:1999:i:2:p:187-206
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  1. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  2. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  3. Torsten Persson & Guido Tabellini, . "Political Economics and Macroeconomic Policy," Working Papers 121, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. repec:tpr:qjecon:v:100:y:1985:i:5:p:823-38 is not listed on IDEAS
  5. Ernesto H. Stein & Jorge M. Streb, 1999. "Elections and the Timing of Devaluations," CEMA Working Papers: Serie Documentos de Trabajo. 140, Universidad del CEMA.
  6. Barry Eichengreen & Ricardo Hausmann & Jürgen Von Hagen, 1999. "Reforming Budgetary Institutions in Latin America: The Case for a National Fiscal Council," Open Economies Review, Springer, vol. 10(4), pages 415-442, October.
  7. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
  8. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  9. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
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