Hyperbolic memory discounting and the political business cycle

T. Scott Findley ()

European Journal of Political Economy, 2015, vol. 40, issue PB, 345-359

Abstract: The vintage political business cycle framework of Nordhaus (1975) represents the idea that the macroeconomic business cycle is manipulated opportunistically by an incumbent government to achieve re-election. A key assumption in this prototypical framework is that voters discount their memories about unemployment and inflation at a constant rate. Yet starting with Ebbinghaus (1885) and Jost (1897), a large body of research in psychology documents an empirical regularity that has come to be known as Jost's Second Law of Forgetting—individuals discount recent memories at a higher rate compared to the rate at which they discount older memories. I find that incorporating this insight from psychology (i.e., hyperbolic memory discounting) into the benchmark framework moderates the amplitude of the predicted political business cycle.

Keywords: Hyperbolic memory discounting; Jost's Second Law of Forgetting; Political business cycle; Inflation; Unemployment (search for similar items in EconPapers)
JEL-codes: D03 D72 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0176268015000798
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Hyperbolic Memory Discounting and the Political Business Cycle (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:40:y:2015:i:pb:p:345-359

DOI: 10.1016/j.ejpoleco.2015.08.002

Access Statistics for this article

European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

More articles in European Journal of Political Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().