MACROECONOMIC POLICY AND ELECTIONS IN OECD DEMOCRACIES*

Authors


  • *

    This paper was presented at the Sapir Conference on “The Political Economy of Business Cycles and Growth,” Tel Aviv University, June 2–3, 1991. We would like to thank our discussants, Alex Cukierman and Ron Shachar, and several conference participants for very useful comments. Alesina's work was supported by a Sloan Research Fellowship.

Abstract

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 on 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 post-electoral jump, which could be explained by either the pre-electoral “loose” monetary and fiscal policies and/or by an opportunistic timing of increases in publicly controlled prices, or indirect taxes.

Ancillary