Political Business Cycles

Words: 1896
Pages: 8
Open Document
Political actors play a pivotal role in the fluctuations in economic activities in any nation. The term is used to illustrate the stimulation of the economy just close to an election with the intention of enhancing prospects of the necessary leadership getting a chance of retaining their position after the election. The empirical evidence of political business cycles is always equivocal despite all the efforts that are put in place to try and establish its very existence. The extensive monetary and fiscal plans have been politically significant effects in the short run, comprising of the lower levels of unemployment, economic development, as well as the benefits from the expenditure of the government on a series of public services (Galí, 2015). …show more content…
To begin with, it is commonly agreed by economists that there exists a short-term tradeoff between the rate of use and employment in the economy versus the inflation levels. Secondly, it is thought that the leaders are reasonable actors who are giving a lot of priority on their selfish political goals over the economic needs of the people in the nation. For instance, the period towards the polls, they will go for inflation for reduced unemployment rates in the country (Drazen, 2000). Thirdly, individuals, who learn about the political business cycle most of the time believe that there is one excellent policy solution in any situation that is in the general interest of the people. The answer that results in a balance between the inflation levels and the rates of joblessness in the nation, commonly, the understanding of a balance is most of the time counter …show more content…
Thus, an autonomous central bank unit is bound to get engaged in electorally based policies as compared to financial organizations that are under the management of the ruling body. The regulatory impacts of such organizational structures are appreciated in the economic theory, but most of the empirical studies on the political business cycles fail to adequately regulate them. (Bertay and Huizinga, 2015) claimed that current reviews of various models of political business cycles might be damaged severely because they do not take into account the organizational difference that tends to bar the activities of the federal policymakers (Galí, 2015). None the less, the economic results such as the economic growth and the lower levels of employment have been extensively studied by the researchers. A connection to the central banks cannot be determined as other external factors might offset or back up the effects of the financial and fiscal policies. Most of the studies try to cover the gap by paying close attention to the policy results for which the central bank can be held accountable, comprising of the short duration interest rates (Bertay and Huizinga, 2015). The outcome is fundamental and very robust: with the
Show More

Related Documents: Political Business Cycles

Evaluate fluctuations of Australia’s GDP in light of business cycle theories Essay

light of business cycle theories. Throughout the history of the Australian economy there has been constant fluctuations of the Gross Domestic Product (GDP), these fluctuations strongly affect the strength of the Australian economy at certain points in time. Fluctuations are a common part of every economy throughout the world; they occur inturn with positive or negative times of economic growth. Many economists have tried to relate these fluctuations in GDP with several business cycle theories…

Words 2121 - Pages 9

unit1level3 assignment with due dates Essay

Unit number and title UNIT 1: The Business Environment Qualification BTEC LEVEL 3: BUSINESS Start date SEPTEMBER 2012 Deadline DECEMBER 2012 Assessor C.GILL Assignment title Two Businesses on our Doorstep; Similar Businesses in Different worlds The purpose of this assignment is to: Give learners the fundamental knowledge of a range of business organisations, and the many factors that shape the nature of organisations operating in an increasingly complex business world. Scenario You have been appointed…

Words 694 - Pages 3

Recession and the History Behind It Essay

or an increase in interest rates, the business cycle is forever expanding or contracting. There is no exact timetable for when each phase begins or for the length of each phase. The chart below from crawfordsworld.com depicts the business cycles in the United States from 1914 – 1992. Business cycle expansions occur in times of economic prosperity when the economy is booming and continues until there is a peak. Once this occurs, the business cycle is said to contract. This contraction…

Words 1060 - Pages 5

Dr. Kim Phillips-Fein's Invisible Hands

Businessman’s Crusade against the New Deal”, traces the conservative intellectual movement and that of American business with their repeated response towards the Federal government’s intrusion into American capitalism from the 1930s through the end of the Reagan era. The author provides a chronological and succinct methodology detailing many historical precedents and incidents where American business had attempted to counter the effect of the US government’s over-reach. The “Invisible Hands” is a play…

Words 1611 - Pages 7

Chapter 3 Business Environment 2015 1 Essay

epidemic on tourism in South-East Asia - Disruptive forms of technological innovation: music file swapping - Elements of country risk Political risk: i) Operating risk: Government’s interference in the firm’s operations/ strikes/wars ii) Transfer risk: Government interferes with a firm’s ability to shift funds into and out of the country Economic risk: i) economic cycles: booms and downturns ii ) exchange rate fluctuations iii) Changes in foreign direct investment policies Legal risk: i) Enactment…

Words 644 - Pages 3

1865 To 1900 Dbq Analysis

afford. Economically speaking, the majority of farmers were living in poor conditions due to the decline of agriculture prices. Politically, the poor farmers did not have much power in comparison to the wealthy industrialists. As a result of the political, industrial, and economic troubles farmers faced, American agriculture suffered during this time period.…

Words 369 - Pages 2

Chapter 2 Discussion Questions Essay

policies and procedures. Political: addresses organizational and personal politics. Many project managers fail because they do not understand the political environment. Symbolic: focuses on symbols and meanings. It’s important to understand an organization’s culture, dress code, work ethic, and so on in managing projects. 3 Top management commitment and support is the number one factor associated with the success of information technology projects. 4 A project life cycle is a collection of project…

Words 414 - Pages 2

Essay on Businessenvironment 110221001624 Phpapp02

Amity Business School BUSINESS ENVIRONMENT Presented By ` Naga S Sridhar N (A-34) Venkatesh Ravada (A-17) Neha Sharma Kapil Sharma (A-39) (A-20) Abhishek Verma Sandeep Dasmanthrao (A-42) (A-19) Amity Business School Business Environment • Business Environment is a direct relationship between successful management and the influence and impact of environmental change. Amity Business School External business environment: • External Business environment is a set of political, economic…

Words 705 - Pages 3

Economics and Changes Essay

influence the situation described in the case. Change is unavoidable in the existence of an organization. Nowadays, most of the organizations in the business world are facing changing business environment. There is no way to avoid either change or die. The major forces which make the changes not only desirable but inevitable are technological, economic, political, social, legal, international and labor market environments. The case in this assignment is Nokia, the Finnish company, faced problem because…

Words 1298 - Pages 6

Inflation and Economy Essay

“Business Cycles and Recessions (1980-2010)” \ Table of Contents 1 business cycle; 1980-2010 2 1980-2010 3 1980-1982 4 1990 5 1990-1991 6 “ “ 7 1970-2010 8 “ “ 9 bibliography 10 rubric A business cycle is the recurring and fluctuating levels of economic activity that an economy experiences over a period of time. In earlier times cycles were thought to be predictable and extremely regular but in this day and age cycles have been extremely irregular…

Words 1264 - Pages 6