Political Business Cycles and Endogenous Elections

Posted: 28 Jul 2018

See all articles by Hakan Berument

Hakan Berument

Bilkent University - Department of Economics

Jac C. Heckelman

Wake Forest University - Department of Economics

Date Written: April 1998

Abstract

Empirical research of political business cycles (PBCs) may suffer from endogeneity bias when incumbent governments have discretion to call for an early election. Using an instrumental variable (IV) routine on data from Japan and the U. K., we find strong evidence to support the notion that election timing is a function of the economy rather than the macroeconomy being driven by elections as assumed in PBC. In single-equation regressions, no evidence of political cycles are found, but Hausman tests suggest elections are endogenous in our regressions. A monetary cycle in Japan and an inflation cycle in the U. K. are uncovered through IV estimation.

Keywords: Instrumental Variables Estimation, Political Business Cycles, Empirical Evidence, Political Elections, Unemployment, Incumbents, Instrumental Variables, Macroeconomics, Political Parties

Suggested Citation

Berument, Hakan and Heckelman, Jac C., Political Business Cycles and Endogenous Elections (April 1998). Southern Economic Journal, Vol. 64, No. 4, 1998, Available at SSRN: https://ssrn.com/abstract=3210196

Hakan Berument (Contact Author)

Bilkent University - Department of Economics ( email )

06533 Ankara
Turkey

Jac C. Heckelman

Wake Forest University - Department of Economics ( email )

P.O. Box 7505
Winston-Salem, NC 27109
United States
(336) 758-5923 (Phone)
(336) 758-6028 (Fax)

HOME PAGE: http://www.wfu.edu/~heckeljc/jac.htm

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