| Abstract: | Summary Nordhaus's (1975) model of the political business cycle is extended in this paper by explicitly formulating the link between the economic sphere (represented by the Phillips curve) and fiscal policy. This extended model yields the hypothesis that during an electoral period the budgetary policy is contractionary in the first half and expansionary in the second half with the consequences of a reduction in unemployment (increase in inflation) before elections and a rise in unemployment (decrease in inflation) after elections. This hypothesis is tested against the data of the Austrian economy by a non-parametric test (which leads to a rejection of our hypothesis for Austria). The extent of the political business cycle bias is demonstrated by policy simulations within a macroeconomic model.
Zusammenfassung Das Modell vonNordhaus (1975) über den Politischen Konjunkturzyklus wird in diesem Artikel erweitert, indem explizit die Beziehung zwischen dem ökonomischen Bereich (repräsentiert durch die Phillips-Kurve) und der Fiskalpolitik hergestellt wird. Dieses erweiterte Modell führt zu der Hypothese, daß während einer Legislaturperiode die Budgetpolitik in der ersten Hälfte restriktiv und in der zweiten Hälfte expansiv ist. Als Konsequenz dieser Politik kommt es zu einer Verringerung der Arbeitslosigkeit (einem Anstieg der Inflation) vor Wahlen und einem Anstieg der Arbeitslosigkeit (einer Verringerung der Inflation) nach den Wahlen. Diese Hypothese wird an Hand österreichischer Daten mit Hilfe eines nichtparametrischen Tests geprüft (was zu einer Ablehnung unserer Hypothese für Österreich führt). Das quantitative Ausmaß des durch den Politischen Konjunkturzyklus entstehenden bias wird dann mit Hilfe von politischen Simulationen im Rahmen eines makroökonomischen Modells demonstriert.
Definitions AK Public purchases of goods and services + public investment (A.S.) - AT Unemployed persons, in total (in 1.000) - AZA Worked hours per worker (in hours) - BAU Central government's expenditures (outlays) in total (A.S.) - BEI Central government's revenues (receipts) in total (A.S.) - BS Budget deficit of the Central government (A.S.) - CB Labour supply (in 1.000) - CH Unemployment rate (%) - CON Public consumption (A.S.) - COR Public consumption (A.S. 1964) - CPN Private consumption (A.S.) - CPR Private consumption (A.S. 1964) - CUB Current balance (A.S.) - DS Direct taxes + public income from property-transfers to households + transfers from households (A.S.) - DX DS-public income from property (A.S.) - D7273 Dummy for monetary policy and Dummy for change from gross turnover tax to VAT (1972+1; 1973–1; other 0) - D7278 Dummy for investment tax (1972+1; 1973–1; 1977+1; 1978–1; other 0) - D73US Dummy for shift of employers to employees (1973+1; other 0) - D7375 Dummy for incomes tax reform (1973–1; 1975–1; other 0) - D7778 Dummy for extra VAT (1977+1; 1978–1; other 0) - EBE Population in total (in 1.000) - EET Employment in total + unemployed (total labour supply; in 1.000) - ESE Employers (in 1.000) - EUS Employees (in 1.000) - FBN Monetary base (A.S.) - FGN Money M1 (A.S.) - FG Money M1 (A.S. 1964) - GDN Gross domestic product (A.S.) - GDR Gross domestic product (A.S. 1964) - GER Energy (1.000 t/TCE) - GIR Industry output (A.S. 1964) - GE Profits in total (A.S.) - GV Profits in total (A.S. 1964) - IS Indirect taxes—transfers to firms (A.S.) - ITN Gross fixed investment (A.S.) - ITR Gross fixed investment (A.S. 1964) - JR Final domestic demand (A.S. 1964) - LA Stocks and statistical discrepancies; National account basis (A.S.) - LEAD Difference of one major party over the other in parliament in percentage points - LB Foreign balance (A.S.) - LKV Long term capital transactions (A.S.) - MA Money M1 + profits (A.S. 1964) - MMN Imports of goods and services (A.S.) - MMR Imports of goods and services (A.S. 1964) - OIN Public investment (A.S.) - OKG Public purchases of goods and services (A.S.) - PC Private consumption deflator (1964=100) - PEN Energy prices (1964=100) - PI Gross fixed investment deflator (1964=100) - PK Imports of goods and services deflator (1964=100) - PL Exports of goods and services deflator (1964=100) - PT Gross domestic product deflator (1964=100) - RES Value change in balance of payments reserves (A.S.) - RIR Interest rate for long term bonds (%) - SD Stocks and statistical discrepancies; National account basis (A.S. 1964) - ST Overall indirect taxes—subsidies; National account basis (A.S.) - STD Direct taxes (A.S.) - STI Indirect taxes (A.S.) - TAH Transfers to households (A.S.) - TBB Trade balance (A.S.) - TTT Time (1960, 1961,..., 1979) - TUN Transfers to firms (A.S.) - TVH Transfers from households (A.S.) - VW Gross fixed investment plus exports of goods and services (A.S. 1964) - WON Changes in foreign currency reserves of the National Bank (A.S.) - WKU Changes in foreign currency reserves of all commercial banks (A.S.) - WW Changes in balance of payments' official reserves (A.S.) - XB Relative energy prices (1964=100) - XXN Exports of goods and services (A.S.) - XXR Exports of goods and services (A.S. 1964) - YLN Wages and salaries (compensation of employees; A.S.) - YOB Public income from property (A.S.) - YVN Net disposable income (A.S.) - YY Net disposable income (A.S.) - YYN National income (A.S.) - ZST Statistical discrepancies in balance of payments (A.S.) - A.S billion Austrian Schilling at current prices - A.S. 1964 billion Austrian Schilling at constant prices (basis 1964) |
