Further Discussion Partisan Cycles

Other empirical studies of RPT report more mixed results. Sheffrin (1989), for example, finds US monetary cycles, but not significantly consistent with RPT in the USA or elsewhere. Using over 100 years of American data, Klein (1996) finds political events associated with ends of slumps and booms, consistent with RPT, although Klein’s study does not directly test RPT. Carlsen (1998, 1999) and Carlsen and Pedersen (1999) investigate nominal rigidities and electoral surprises, which together should produce RPT cycles, and compares measures reflecting their combination with those analogously derived fromHibbsian partisan theoryThe results are weakly positive for US inflation cycles, supporting both versions of partisan theory, negative for US real outcomes, and mixed elsewhere; Carlsen and Pedersen (1999) find clear RPT support in the UK, some RPT support in Canada and Australia, classical partisan-theory support in the USA, and inconclusive findings in Sweden and Germany. Finally, Faust and Irons (1999) find evidence to support Alesina and colleagues’ proposition that the first two years of new administrations exhibit the distinctive real outcomes RPT predicts (right-worse; left-better) but also that little of this distinctiveness can be attributed to partisan monetary policies, echoing some of the above discussion. Others stress more theoretical limitations. Following Rogoff (1988), Garfinkel and Glazer (1994) ask whether US bargainers, in order to avoid election surprises that would alter the real terms of nominal contracts, would simply defer contracts to postelection, finding that some contracts do exhibit significant post-electoral kyphosis. This suggests that bargainers do perceive electoral-economic uncertainty sufficient to warrant altering their contracting behavior, supporting RPT’s theoretical basis, but that very alteration in behavior mutes any monetary-surprise-induced real cycles, weakening RPT’s explanation for partisan real-outcome cycles. Ellis and Thoma (1991) emphasize instead that, because election timing in most parliamentary systems is endogenous, partisan surprises there are more continuous and irregular, and likely somewhat smaller, than in exogenous election timing systems. Ellis and Thoma (1995) find evidence of current account, real exchange rate, and terms of trade cycles supporting hypotheses derived from their model reflecting this consideration. Heckelman (2001), relatedly, models rational economic agents facing uncertainty regarding election timing and election winners.
Real effects here depend on partisanship in current and previous periods, time since the last election, and incumbent popularity. In this RE model, unlike in Alesina’s RPT, lefts/rights spur/dampen real output throughout their term, and these real effects rise rather than diminish over the term. Drazen (2001), finally, questions RPT’s emphasis on monetary policy, giving an active-fiscal/passive-monetary RE model that predicts political-economic cycles more consistent with the full policy and outcome evidentiary pattern described above..

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Democracy And Partisanship