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    Elections and macroeconomic policy cycles

    Rogoff, K. and Sibert, Anne (1988) Elections and macroeconomic policy cycles. Review of Economic Studies 55 (1), pp. 1-16. ISSN 0034-6527.

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    There is an extensive empirical literature on political business cycles, but its theoretical foundations are grounded in pre-rational expectations macroeconomic theory. Here we show that electoral cycles in taxes, government spending and money growth can be modeled as an equilibrium signaling process. The cycle is driven by temporary information asymmetries which can arise if, for example, the government has more current information on its performance in providing for national defence. Incumbents cheat least when their private information is either extremely favourable or extremely unfavourable. An exogeneous increase in the incumbent party's popularity does not necessarily imply a damped policy cycle.


    Item Type: Article
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Sarah Hall
    Date Deposited: 04 Aug 2020 07:52
    Last Modified: 02 Aug 2023 18:01


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