Is the Political Business Cycle for Real?
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.
Suggested citation: Blomberg, Brock S., and Gregory D. Hess, 2000. “Is the Political Business Cycle for Real?,” Federal Reserve Bank of Cleveland, Working Paper, no. 00-16.