Resource title

Electoral uncertainty, fiscal policy and macroeconomic fluctuations

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Resource description

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.

Resource author

Jim Malley, Apostolis Philippopoulos, Ulrich Woitek

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Resource language

eng

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text/html

Resource resource URL

http://hdl.handle.net/10419/19057

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Adapt according to the presented license agreement and reference the original author.