Working Paper

Is the political business cycle for real?

Abstract: This paper's macroeconomic model combines features from both real and political business cycle models. It augments a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities: First, that on average the economy expands early under Democratic presidents and contracts early under Republican presidents. Second, that presidents whose parties successfully retain the presidency have stronger-than-average growth in the second half of their terms. The model generates both of these features in conformity with U.S. post-World War II data.

Keywords: Business cycles;

https://doi.org/10.26509/frbc-wp-200016

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2000

Number: 0016