Testing the Satisficing Version of the Political Business Cycle: 1905-1984

Lawrence Davidson, Michele Fratianni and Juergen von Hagen

Public Choice, 1992, vol. 73, issue 1, 35 pages

Abstract: This paper develops a test of the satisficing version of the political business cycle. Previous tests have focused on maximizing models of political behavior and are not sufficiently general to test for satisficing behavior. Using annual U.S. data for the period 1905 to 1984, the authors find evidence supporting the satisficing version of the political business cycle model, but they reject the maximizing version. In accordance with the satisficing hypothesis, the authors find that increasing inflation or unemployment and decreasing monetary base growth in the third year of a presidential term are followed typically by reversals during the election year. Copyright 1992 by Kluwer Academic Publishers

Date: 1992
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