The major part of the electoral cycles literature has studied closed economies, in spite of
the explicit consideration of the open economy case by Lindbeck
(1976). Using the empirical evidence supporting the conjecture that election results seemed to be more sensitive to changes
rather than to the level of state variables in the popularity function, Lindbeck (1976) assumed that
the functioning of the political system is always not compatible with the requirements of a
stabilization policy. In fact, in order to be an electoral winner the incumbent government should
`destabilize' the economy, i.e., should deliberately create the right changes in the economy at the right
point of time.
As is well-known, the electoral cycle literature has developed in two clearly distinct
phases. The first one took place in mid-1970s, due to the influential work of
Nordhaus (1975) and Hibbs (1977). These studies had in common a `pre-rational expectations'
model of the economy and were based upon an exploitable Phillips curve.
Furthermore, in accordance with the perspectives assumed by Nordhaus and
Hibbs, the subsequent models of electoral cycles emphasized on either the `opportunistic'
(a la Nordhaus) or the `partisan' (a la Hibbs)
incentives to the policy makers. In opportunistic model, the policy makers maximize their popularity
or their probability of re-election, independent of the ideological concerns. In partisan
models, different political parties represent the interests of different constituencies and, when in
office, follow policies which are favorable to their supporting groups. Specifically, it is assumed
that the left-wing parties are more concerned with the problem of unemployment,
while the
right-wing parties are relatively more willing to bear the cost of unemployment
to reduce inflation. |
