TY - JOUR
T1 - Do political parties foster business cycles? An examination of developed economies
AU - Chang, Koyin
AU - Kim, Yoonbai
AU - Tomljanovich, Marc
AU - Ying, Yung Hsiang
N1 - Funding Information:
The authors thank Mukta Ali, Chris Bollinger, and Jakob de Haan for their valuable comments and Taiwan’s National Science Council for its support through grant NSC96-2415-H-110-002-MY2. All remaining errors are our own.
PY - 2013/2
Y1 - 2013/2
N2 - This paper explores different possible factors that have impacted business cycle synchronization across industrialized countries in the past quarter century. We employ a comprehensive model that includes as the main determinants of output co-movements not only trade and financial integration, but also similarities of economic policies and political preferences across countries. Focusing on 14 developed countries from 1980 to 2010, our main finding is that economic policies and the political environment have strong influences on business cycles in each country and their correlations across countries. In particular, we find that having differing political parties between two countries lowers business cycles correlations, but only when we allow for partisan effects to dissipate several quarters after political elections. Our results hold while also controlling for economic determinants of business cycle correlations, including trade, finance, geography and measures of policy convergence. Our findings therefore demonstrate a more comprehensive link between these factors and business cycle synchronization than prior studies.
AB - This paper explores different possible factors that have impacted business cycle synchronization across industrialized countries in the past quarter century. We employ a comprehensive model that includes as the main determinants of output co-movements not only trade and financial integration, but also similarities of economic policies and political preferences across countries. Focusing on 14 developed countries from 1980 to 2010, our main finding is that economic policies and the political environment have strong influences on business cycles in each country and their correlations across countries. In particular, we find that having differing political parties between two countries lowers business cycles correlations, but only when we allow for partisan effects to dissipate several quarters after political elections. Our results hold while also controlling for economic determinants of business cycle correlations, including trade, finance, geography and measures of policy convergence. Our findings therefore demonstrate a more comprehensive link between these factors and business cycle synchronization than prior studies.
KW - Business cycle correlation
KW - Political business cycle
KW - Trade and financial integration
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U2 - 10.1016/j.jce.2012.04.005
DO - 10.1016/j.jce.2012.04.005
M3 - Article
AN - SCOPUS:84875248727
SN - 0147-5967
VL - 41
SP - 212
EP - 226
JO - Journal of Comparative Economics
JF - Journal of Comparative Economics
IS - 1
ER -