Political business cycles: a reviewa

Abstract

In the last four decades, the relationship between economic performance and
politics has been examined by means of various theoretical and empirical approaches, suggesting
the possibility of a political business cycle in many countries. This study presents a
review of the main models of Business Cycle Theory and of the main findings reported in
the international literature. In part, the empirical evidence suggests that the political variable,
particularly the electoral variable, is an important determinant of cyclical movements in the
economy, indicating that Business Cycle Theory is consistent with the observed performance
of several modem democratic societies.

JEL Classification: D72; D78; B21; H50.