PRE-ELECTIONAL DECREASE OF THE UNEMPLOYMENT RATE

Abstract

Opportunistic business cycle models test whether the current government has the ability to reduce unemployment in pre-election period. First opportunistic business cycle models tested regressions using unemployment rate as the dependent variable, and for explanatory variables used unemployment rate in the previous two periods and political dummy variable defined as unity several quarters prior to election and zero elsewhere. Such models did not find evidence of opportunistic cycle for unemployment. Haynes and Stone in their model estimated regressions using unemployment as the dependent variable and sixteen dummy variables as explanatory variables (one for each quarter in the Presidential electoral term). Results showed that unemployment has roughly sinusoidal sixteen quarter cycle, where unemployment troughs on average the quarter of the election. Mentioned models are tested with data for the United States for the period from 1948 to 2011 where regressions results coincide with models mentioned in the article.

Keywords

• Unemployment
• Opportunistic business cycle
• Political economy