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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/19057
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| Title: | | Electoral uncertainty, fiscal policy and macroeconomic fluctuations  |
| Authors: | | Malley, Jim Philippopoulos, Apostolis Woitek, Ulrich |
| Issue Date: | | 2005 |
| Series/Report no.: | | CESifo working papers 1593 |
| Abstract: | | In this paper we study the link between elections, fiscal policy and aggregate fluctuations. The set-up is a stylized dynamic stochastic general equilibrium model incorporating both technology and political re-election shocks. The later 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. |
| Subjects: | | political uncertainty business cycles & growth optimal policy hybrid maximum likelihood estimation |
| JEL: | | E6 D9 H5 H1 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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