Economic stimulus timing and leadership tenure



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How do incumbents use fiscal and monetary policies to stay in power longer? Typically the “political business cycle” or more recently the “political budget cycle,” has been cited as the answer to this question. However since the inception of this theory the empirical evidence of the returns on investment, so to speak, has been mixed and ambiguous. This research looks to correct a fundamental flaw in the way the political business cycle (PBC) has been thought of for over 40 years. I propose an amended theory of the PBC that includes an economic lag differential for each type of fiscal stimulus tool (tax cuts, public works projects, direct fiscal spending, and monetary easing) that makes it imperative for the government to know where one stands on the economic business cycle (EBC)—be it growing, shrinking, in the trough, or at the peak. This dissertation will take a global look at this theory by testing it against 21 advanced industrial economies as well looking at case studies of a country that have seen a myriad of different stimulus policies with mixed results and leadership outcomes—Japan.



Stimulus, Timing, Japan, OECD, Leadership tenure