Polarized business cycles

Marina Azzimonti and Matthew Talbert

Journal of Monetary Economics, 2014, vol. 67, issue C, 47-61

Abstract: Four stylized facts motivate this paper: (i) business cycle movements are wider in emerging countries (EC) than in developed ones; (ii) EC experience greater economic policy uncertainty; (iii) EC are more polarized and less politically stable; and (iv) EPU is positively related to political polarization. A standard real business cycle model augmented to incorporate political polarization, a ‘polarized business cycle’ (PBC) model, is shown to be consistent with these facts. We first derive our results analytically, and then quantify the effects of a permanent increase in polarization to the US economy.

Keywords: Real business cycle; Economic policy uncertainty; Polarization; Political stability; Time consistency (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (52)

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Working Paper: Polarized business cycles (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:67:y:2014:i:c:p:47-61

DOI: 10.1016/j.jmoneco.2014.07.001

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