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Rational Partisan Theory: Evidence for Seven OECD Economies

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  • Fredrik Carlsen
  • Elin F. Pedersen

Abstract

According to the Rational Partisan Theory of business cycles (“RPT”), ex ante uncertainty about the outcome of elections will generate post‐election output growth fluctuations. This paper employs vote prediction equations and opinion polls to compute election win probability estimates for 62 elections in seven OECD economies. The probability estimates are used to calibrate partisan intervention terms entered in output growth regressions. For the UK and, to some extent, Canada and Australia, our results are supportive of the RPT. For the US, the calibrated intervention terms are dominated by a partisan dummy variable turned on after each election.

Suggested Citation

  • Fredrik Carlsen & Elin F. Pedersen, 1999. "Rational Partisan Theory: Evidence for Seven OECD Economies," Economics and Politics, Wiley Blackwell, vol. 11(1), pages 13-32, March.
    • Handle: RePEc:bla:ecopol:v:11:y:1999:i:1:p:13-32
    DOI: 10.1111/1468-0343.00051
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    Cited by:

    1. Ferré, Montserrat & Manzano, Carolina, 2014. "Rational Partisan Theory with fiscal policy and an independent central bank," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 27-37.
    2. Robert Grafstein & Kiki Caruson, 2008. "Surprise party," Public Choice, Springer, vol. 137(1), pages 315-328, October.
    3. Leif Helland, 2011. "Partisan conflicts and parliamentary dominance: the Norwegian political business cycle," Public Choice, Springer, vol. 147(1), pages 139-154, April.
    4. Robert Grafstein, 2009. "The Puzzle of Weak Pocketbook Voting," Journal of Theoretical Politics, , vol. 21(4), pages 451-482, October.
    5. Block, Steven A. & Vaaler, Paul M., 2004. "The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries," Journal of International Money and Finance, Elsevier, vol. 23(6), pages 917-946, October.
    6. Faraji, Omid & Kashanipour, Mohammad & MohammadRezaei, Fakhroddin & Ahmed, Kamran & Vatanparast, Nader, 2020. "Political connections, political cycles and stock returns: Evidence from Iran," Emerging Markets Review, Elsevier, vol. 45(C).
    7. Camyar, Isa & Ulupinar, Bahar, 2013. "The partisan policy cycle and firm valuation," European Journal of Political Economy, Elsevier, vol. 30(C), pages 92-111.
    8. John Maloney & Andrew C. Pickering & Kaddour Hadri, 2003. "Political Business Cycles and Central Bank Independence," Economic Journal, Royal Economic Society, vol. 113(486), pages 167-181, March.
    9. Goodhart, Lucy, 2013. "Who Decides? Coalition Governance and Ministerial Discretion," Quarterly Journal of Political Science, now publishers, vol. 8(3), pages 205-237, June.
    10. Frode Brevik & Manfred Gärtner, 2005. "Partisan Theory and the New Keynesian and Sticky-Information Phillips Curves," University of St. Gallen Department of Economics working paper series 2005 2005-25, Department of Economics, University of St. Gallen.
    11. Robert Grafstein, 2000. "Employment, Party Economic Performance, and the Formation of Partisan Preferences," Journal of Theoretical Politics, , vol. 12(3), pages 325-351, July.
    12. Steven Hall & Misa Nishikawa, 2018. "Alternation of parties in power and economic volatility: testing the rational partisan hypothesis and policy learning hypothesis," Economics of Governance, Springer, vol. 19(2), pages 91-118, May.
    13. Michael Berlemann & Gunther Markwardt, 2007. "Unemployment and Inflation Consequences of Unexpected Election Results," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 1919-1945, December.
    14. Michael M. Bechtel & Roland Füss, 2010. "Capitalizing on Partisan Politics? The Political Economy of Sector‐Specific Redistribution in Germany," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2‐3), pages 203-235, March.
    15. Arnab Bhattacharjee & Sean Holly, 2010. "Rational Partisan Theory, Uncertainty, And Spatial Voting: Evidence For The Bank Of England'S Mpc," Economics and Politics, Wiley Blackwell, vol. 22(2), pages 151-179, July.
    16. Fredrik Carlsen, 2006. "Election cycles, party ideology and incumbent popularity: theory and evidence for OECD economies," Working Paper Series 7906, Department of Economics, Norwegian University of Science and Technology.
    17. Eric DUBOIS, 2010. "A Simple Politico-Economic Model to Predict Vote and Growth in France," EcoMod2004 330600045, EcoMod.
    18. Mattias Erlandsson, 2004. "Partisan Differences in Swedish Macroeconomic Policy," Public Choice, Springer, vol. 120(1_2), pages 205-220, July.

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