Political Parties and the Business Cycle in the United States, 1948-1984
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CitationAlesina, Alberto, and Jeffrey Sachs. 1988. Political parties and the business cycle in the United States, 1948-1984. Journal of Money, Credit and Banking 20(1): 63-82.
AbstractThis paper tests the existence and the extent of a politically induced business cycle in the U.S. in the post—World War II period. The cycle described in this paper is different from the traditional "political business cycle" of Nordhaus. It is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts. From an explicit optimization problem we derive a system of equations for output and money growth. Then we successfully test the non-linear restriction imposed by the theory on the parameters of the system of equations. We cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:4553026
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