Can business planning be improved if more attention is paid to underlying political cycles? This paper compares practitioner and researcher perspectives on this issue. While practioners stand to gain useful insights from a careful examination of past political cycles, these insights may be disconfirmed by rigorous tests carried out by researchers. In this paper we isolate and examine five hypotheses from the literature on the political-economic cycle.
KEY WORDS Business cycles Interventions Political forecasting
An important source of uncertainty in business decision making comes from the political context. As Ascher (1981) points out, 'political forecasting is the weakest link in forecasting', and the political context 'is often ignored (on the dubious grounds that in the long run, relatively short-lived political conditions or policy decisions will have no effect), or it is considered in a rudimentary fashion' (p. 260). Rosenstone (1983) indicates that the outcome of presidential elections may be predicted based on an analysis of economic conditions, and various scholars (Nordhaus, 1975;Tufte, 1978;Mevorach, 1985) have found evidence for a political-economic cycle. Can an analysis of economic performance based on the recurring regularities of the political cycle be used as a tool by business planners?
This paper examines regularities in economic conditions that are supposed to coincide with national election results. Because the role of timing is crucial in business decisions, how politics affects economic conditions, if taken into account by business planners, might produce significant benefits. Companies may be able to gain strategic advantage when they correctly anticipate changes in the business cycle. F o r example, purchasing capital goods during