Political Parties and the Business Cycle in the United States, 1948-1984
42 Pages Posted: 25 Jun 2004 Last revised: 26 Oct 2022
Date Written: June 1986
Abstract
This paper tests the existence and the extent of a politically induced business cycle in the U.S. in the post-World War II period. The cycle described in this paper is different from the traditional "political business cycle" of Nordhaus. It is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts. From an explicit optimization problem we derive a system of equations for output and money growth. Then we successfully test the non-linear restriction imposed by the theory on the parameters of the system of equations. We cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Dummy Endogenous Variables in a Simultaneous Equation System
-
Elections and Macroeconomic Policy Cycles
By Kenneth Rogoff and Anne Sibert
-
The Effect of Economic Events on Votes for President: 1984 Update
By Ray C. Fair
-
Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition
By Timothy J. Besley and Anne Case
-
Estimating Fully Observed Recursive Mixed-Process Models with Cmp
-
Congressional Distributive Politics and State Economic Performance
By Steven D. Levitt and James M. Poterba
-
Challenger Entry and Voter Learning
By Sanford C. Gordon, Gregory Huber, ...