Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099698 | Journal of Economic Dynamics and Control | 2007 | 30 Pages |
Abstract
In this paper we study the link between elections, fiscal policy and aggregate fluctuations. The setup is a stylized dynamic stochastic general equilibrium model incorporating both technology and political re-election shocks. The latter are incorporated via a two-party model with elections. The main theoretical prediction is that forward-looking incumbents, with uncertain prospects of re-election, find it optimal to follow relatively shortsighted fiscal policies, and that this hurts capital accumulation. Our econometric estimation, using U.S. data, finds a statistically significant link between electoral uncertainty and policy instruments and in turn macroeconomic outcomes.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Jim Malley, Apostolis Philippopoulos, Ulrich Woitek,