Alternation of parties in power and economic volatility: testing the rational partisan hypothesis and policy learning hypothesis

Steven Hall () and Misa Nishikawa
Additional contact information
Steven Hall: Ball State University
Misa Nishikawa: Ball State University

Economics of Governance, 2018, vol. 19, issue 2, No 1, 118 pages

Abstract: Abstract Right and left parties have distinct macroeconomic preferences that could create different levels of volatility during their executive tenures. But rational partisan theory argues that, because actors in the economy anticipate ruling party behavior, partisan differences only matter when election outcomes are uncertain. We argue that policy risk from ruling parties extends beyond elections, leading to important variation in growth volatility that occurs during a ruling party’s tenure. Building on theories of policy risk and learning, we argue that after elections, economic actors still face uncertainty about the policies of new ruling parties. With time in power, new ruling parties build policy track records, reducing policy risk and, thus, volatility. We estimate a learning curve model of ruling party duration’s effect on the variation in quarterly GDP growth rates. Using data from 44 democracies between 1981 and 2009, we find that learning processes extend beyond the conclusion of uncertain elections.

Keywords: Economic volatility; Policy risk; Rational partisan hypothesis; Ruling party duration (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10101-018-0204-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:ecogov:v:19:y:2018:i:2:d:10.1007_s10101-018-0204-5

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10101/PS2

DOI: 10.1007/s10101-018-0204-5

Access Statistics for this article

Economics of Governance is currently edited by Amihai Glazer and Marko Koethenbuerger

More articles in Economics of Governance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().