Political Cycles in OECD Economies

74 Pages Posted: 25 Jun 2004 Last revised: 14 Jul 2010

See all articles by Alberto F. Alesina

Alberto F. Alesina

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 1990

Abstract

This paper studies whether the dynamic behavior of GNP growth, unemployment and inflation is systematically affected by the timing of elections and of changes of governments. The sample includes the last three decades in 18 OECD economies. We explicitly test the implication of several models of political cycles, both of the "opportunistic" and of the "partisan" type. Also, we confront the implication of recent "rational" models with more traditional approaches. Our results can be summarized as follows: a) The "political business cycle" hypothesis, as formulated in Nordhaus (1975) on output and unemployment is generally rejected by the data. With the exception of Japan, we also reject by the extension of the "political business cycle" model, with endogenous timing of elections; b) inflation tends to increase immediately after elections, perhaps as a result of preelectoral expansionary monetary and fiscal policies; (c) we fire evidence of temporary partisan differences in output and unemployment and of long-run partisan differences in the inflation rate as implied by the "rational partisan theory" by Alesina (1987); (d) we find virtually no evidence of permanent partisan differences in output and unemployment.

Suggested Citation

Alesina, Alberto F. and Roubini, Nouriel, Political Cycles in OECD Economies (October 1990). NBER Working Paper No. w3478. Available at SSRN: https://ssrn.com/abstract=226679

Alberto F. Alesina (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8388 (Phone)
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Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0886 (Phone)
212-995-4218 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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