Discussion Paper Details

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Title: Macroeconomic Policy and Elections in OECD Democracies

Author(s): Alberto F Alesina, Gerald D Cohen and Nouriel Roubini

Publication Date: January 1992

Keyword(s): Elections and Political Business Cycle

Programme Area(s): International Macroeconomics

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. First, we find very little evidence of pre-electoral effects of economic outcomes, in particular, on GDP growth and unemployment. Second, we see some evidence of `political monetary cycles', that is, expansionary monetary policy in election years. Third, we observe indications of `political budget cycles', or `loose' fiscal policy prior to elections. Fourth, 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.

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Bibliographic Reference

Alesina, A, Cohen, G and Roubini, N. 1992. 'Macroeconomic Policy and Elections in OECD Democracies'. London, Centre for Economic Policy Research.