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Macroeconomic Policy and Elections in OECD Democracies

Author

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  • Alesina, Alberto F
  • Cohen, Gerald D
  • Roubini, Nouriel

Abstract

The purpose of this paper is to test for evidence of opportunistic `political business cycles' in a large sample of 18 OECD economies. Our results can be summarized as follows. First, we find very little evidence of pre-electoral effects of economic outcomes, in particular, on GDP growth and unemployment. Second, we see some evidence of `political monetary cycles', that is, expansionary monetary policy in election years. Third, we observe indications of `political budget cycles', or `loose' fiscal policy prior to elections. Fourth, inflation exhibits a post-electoral jump, which could be explained by either the pre-electoral `loose' monetary and fiscal policies and/or by an opportunistic timing of increases in publicly controlled prices, or indirect taxes.

Suggested Citation

  • Alesina, Alberto F & Cohen, Gerald D & Roubini, Nouriel, 1992. "Macroeconomic Policy and Elections in OECD Democracies," CEPR Discussion Papers 608, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:608
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    1. repec:cup:apsrev:v:71:y:1977:i:04:p:1467-1487_26 is not listed on IDEAS
    2. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    3. Bizer, David S. & Durlauf, Steven N., 1990. "Testing the positive theory of government finance," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 123-141, August.
    4. Ito, Takatoshi, 1990. "The timing of elections and political business cycles in Japan," Journal of Asian Economics, Elsevier, vol. 1(1), pages 135-156.
    5. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
    6. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    7. Lindbeck, Assar, 1976. "Stabilization Policy in Open Economies with Endogenous Politicians," American Economic Review, American Economic Association, vol. 66(2), pages 1-19, May.
    8. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    9. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    10. repec:fth:harver:1496 is not listed on IDEAS
    11. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    More about this item

    Keywords

    Elections; Political Business Cycle;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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