Equilibrium Political Budget Cycles

Kenneth Rogoff

American Economic Review, 1990, vol. 80, issue 1, 21-36

Abstract: Political business cycle theories generally rely on nominal rigidities and voter myopia. This paper offers an equilibrium theory that preserves some basic insights from earlier models, though with significant refinements. The "political budget cycle" emphasized here is in fiscal policy rather than output and inflation; it arises via a multidimensional signal process. One can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure. Copyright 1990 by American Economic Association.

Date: 1990
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Working Paper: Equilibrium Political Budget Cycles (1987)
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