Random timing of elections and the political business cycle

✍ Scribed by Victor Ginsburgh; Philippe Michel

• Publisher: Springer US
• Year: 1983
• Tongue: English
• Weight: 386 KB
• Volume: 40
• Category: Article
• ISSN: 0048-5829
• DOI: 10.1007/bf00118517

✦ Synopsis

In his 1975 paper, Nordhaus formally proves that governments whose aim is to be reelected, will generate 'political' business cycles. Empirical results do not confirm this proposition, especially in countries used to early elections.

We show that if there is a non-zero probability for elections to be called before the legal term, the political business cycle will be less pronounced, even if no early election actually takes place; moreover, if the normal electoral cycle is interrupted before the legal term, one might observe an inversion of the business cycle, or no cycle at all. * We are grateful to David Hendry for useful comments. At the Eurooean Public Choice Society Meeting in Oxford, April 1981, B. Frey made us aware of a paper by L/ichler (1980), who used a similar approach to state and prove proposition 4.1.