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POLITICAL AND PARTISAN CYCLES IN THE AUSTRALIAN ECONOMY *

POLITICAL AND PARTISAN CYCLES IN THE AUSTRALIAN ECONOMY * I. INTRODUCIION In this paper we examine the extent to which political factors affect macroeconomic variables in the Australian economy. In particular, we answer three related sets of questions. Firstly, to what extent do incumbent governments manipulate the economy in order t raise their probability o of winning an election? Secondly. to what extent do policy makers take advantage of economic circumstances in choosing the timing of elections? Finally, is there any difference in the performance of the macroeconomy under Liberal, and under Labor governments in Australia? We use time-series econometric techniques t address these questions, and focus on Federal o elections in post-war Australia. These techniques allow us to uncover any statistically significant differences in the performance of the economy around election times, and under different political parties. While the (statistically) small number of elections makes inference somewhat hazardous, we find little evidence of political manipulation of the economy. or of partisan differences in the performance of the economy. The only exception to this conclusion is a statistically significant rise in government consumption and government capital investment in the four quarters prior to elections. The finding that there is little evidence of political or electoral cycles in http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Economic Papers Wiley

POLITICAL AND PARTISAN CYCLES IN THE AUSTRALIAN ECONOMY *

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Publisher
Wiley
Copyright
1997 BLP/University of Adelaide/Finders University
ISSN
0004-900X
eISSN
1467-8454
DOI
10.1111/j.1467-8454.1997.tb00819.x
Publisher site
See Article on Publisher Site

Abstract

I. INTRODUCIION In this paper we examine the extent to which political factors affect macroeconomic variables in the Australian economy. In particular, we answer three related sets of questions. Firstly, to what extent do incumbent governments manipulate the economy in order t raise their probability o of winning an election? Secondly. to what extent do policy makers take advantage of economic circumstances in choosing the timing of elections? Finally, is there any difference in the performance of the macroeconomy under Liberal, and under Labor governments in Australia? We use time-series econometric techniques t address these questions, and focus on Federal o elections in post-war Australia. These techniques allow us to uncover any statistically significant differences in the performance of the economy around election times, and under different political parties. While the (statistically) small number of elections makes inference somewhat hazardous, we find little evidence of political manipulation of the economy. or of partisan differences in the performance of the economy. The only exception to this conclusion is a statistically significant rise in government consumption and government capital investment in the four quarters prior to elections. The finding that there is little evidence of political or electoral cycles in

Journal

Australian Economic PapersWiley

Published: Jun 1, 1997

References