Elections, the economy, and the political cycle

a review of classic literature

Abstract

This article aims at discussing the main theories on political-econom ical cycles. T h e central problem is realizing h ow politicians in office w ill manipulate the norms that regulate the econom ic activity in their own favor during electoral periods. T heories include tw o basic premises: (1) the opinion o f voters on the governm ent varies according to the performance o f the econom y (central elements o f such rating being: level o f em ploym ent, inflation rate, and econom ic grow th); and (2) the governm ent knows h ow voters rate the macro-economical conditions o f the country, and should such rating be negative, w ill seek to match the current econom ic situation to the closest possible to the expectations o f voters. A n analysis o f the literature evidences the inexistence o f definite conclusions.