Electoral uncertainty, fiscal policy and macroeconomic fluctuations

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1593

Classification and Topics

• Classification: Wirtschaft
• Subject: political uncertainty ; business cycles & growth ; optimal policy ; hybrid maximum likelihood estimation ; Wahlverhalten ; Finanzpolitik ; Politischer Konjunkturzyklus ; Schätzung ; Theorie ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Malley, Jim ; Philippopoulos, Apostolis ; Woitek, Ulrich
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/19057
• Last update: 24.04.2025, 3:03 PM CEST