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Testing the satisficing version of the political business cycle 1905–1984

✍ Scribed by Lawrence S. Davidson; Michele Fratianni; Jürgen Hagen

Publisher
Springer US
Year
1992
Tongue
English
Weight
700 KB
Volume
73
Category
Article
ISSN
0048-5829

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✦ Synopsis

This paper develops a test of the satisficing version of the political business cycle. Previous tests have focused on maximizing models of political behavior and are not sufficiently general to test for satisficing behavior. Using annual U.S. data for the period 1905 to 1984, we find evidence supporting the satisficing version of the political business cycle model, but we reject the maximizing version. In accordance with the satisficing hypothesis, we find that increasing inflation or unemployment and decreasing monetary base growth in the third year of a presidential term are followed typically by reversals during the election year. * We wish to thank Gordon Tullock and two anonymous referees for valuable comments.

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