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Electoral uncertainty, fiscal policy and macroeconomic fluctuations

Malley, J; Philippopoulos, A; Woitek, U (2007). Electoral uncertainty, fiscal policy and macroeconomic fluctuations. Journal of Economic Dynamics and Control, 31(3):1051-1080.

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.

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:07 Faculty of Science > Institute of Mathematics
Dewey Decimal Classification:510 Mathematics
Scopus Subject Areas:Social Sciences & Humanities > Economics and Econometrics
Physical Sciences > Control and Optimization
Physical Sciences > Applied Mathematics
Uncontrolled Keywords:Political uncertainty, Business cycles and growth, Optimal policy, Hybrid maximum likelihood estimation
Language:English
Date:2007
Deposited On:15 Dec 2009 13:05
Last Modified:03 Jun 2025 01:36
Publisher:Elsevier
ISSN:0165-1889
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/j.jedc.2006.06.004
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