Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123213
Authors: 
Findley, T. Scott
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5556
Abstract: 
The vintage political business cycle framework of Nordhaus (1975) represents the idea that the macroeconomic business cycle is manipulated opportunistically by an incumbent government to achieve re-election. A key assumption in this prototypical framework is that voters discount their memories about unemployment and inflation at a constant rate. Yet starting with Ebbinghaus (1885) and Jost (1897), a large body of research in psychology documents an empirical regularity that has come to be known as Jost’s Second Law of Forgetting - individuals discount recent memories at a higher rate compared to the rate at which they discount older memories. I find that incorporating this insight from psychology (i.e., hyperbolic memory discounting) into the benchmark framework moderates the amplitude of the predicted political business cycle.
Subjects: 
hyperbolic memory discounting
Jost’s Second Law of Forgetting
political business cycle
inflation
unemployment
JEL: 
D03
D72
Document Type: 
Working Paper

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