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Assigning Economic Policy and Business Cycle Shocks to Democrats and Republicans: A Common Trends Approach

Author

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  • Hjelm, Göran

    (Department of Economics, Lund University)

Abstract

We estimate a so called common trends model of federal taxes and spending in the U.S.. Using dates on presidential terms as well as the NBER business cycle, we are able to interpret the estimated permanent shock as being of structural policy origin and the transitory shock as being of (to politicians) exogenous business cycle origin. Apart from strong partisan effects, we find that Republicans attempts to reduce the public sector during the first half of the term and that Republicans also have been unlucky to have been in office during the major part of the negative (exogenous) business cycle shocks.

Suggested Citation

  • Hjelm, Göran, 2001. "Assigning Economic Policy and Business Cycle Shocks to Democrats and Republicans: A Common Trends Approach," Working Papers 2001:22, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2001_022
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    More about this item

    Keywords

    Fiscal policy; Democrats; Republicans; Partisan differences; Common Trends;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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