Macroeconomic Policy and Elections in OECD Democracies

   (458 K)

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: 1) We find very little evidence of pre-electoral effects of economic outcomes, in particular, on GDP growth and unemployment; 2) We see some evidence of "political monetary cycles." that is, expansionary monetary policy in election years; 3) We also observe indications of "political budget cycles," or "loose" fiscal policy prior to elections; 4) Inflation exhibits a postelectoral jump, which could be explained by either the preelectoral "loose" monetary and fiscal policies and/or by an opportunistic timing of increases in publicly controlled prices, or indirect taxes.

Published:

• Economics and Politics, 4, pp.1-30 March 1992 ,
• in Political Economy, Growth and Business Cycles, Alex Cukierman, Zvi Hercovitz, and Leonardo Leiderman (eds.), MIT Press, 1992.

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