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Applying Political Business Cycle to Explain Macroeconomic Policies in Iran: A Public Choice Perspective

    Author

    • Hojat Izadkhasti

    Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran

,

Document Type : Original Article

10.29252/jep.1.2.175
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Abstract

Public choice theorists evaluate the government’s behavior within the framework of political business cycles. Considering the significant role of macroeconomic factors such as inflation and unemployment in voters’ behavior, governments with politically beneficial behaviors seek to increase voter satisfaction and the probability of their re-election through adopting economic policies. Thus, the long-term welfare of the current and future generations will be sacrificed to governments' short-term beneficial policies. This study analyzed the political business cycles within the framework of the Nordhaus (1975) approach by using the optimal control method and maximizing the social voting function. The results indicated that the election-winning government increases the unemployment rate to control inflation. However, by approaching the next election period, the elected government reduces the unemployment rate close to the point corresponding to short-term policy, resulting in increasing the inflation again. In the long-term, the policymaker selects a policy with lower unemployment and higher inflation with respect to the optimal point.

Keywords

  • Public choice
  • Political economy
  • Business cycles
  • Inflation
  • Unemployment
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References
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International Journal of New Political Economy
Volume 1, Issue 2 - Serial Number 2
July 2020
Pages 175-197
Files
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History
  • Receive Date: 08 April 2020
  • Revise Date: 09 May 2020
  • Accept Date: 24 May 2020
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How to cite
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Statistics
  • Article View: 259
  • PDF Download: 363

APA

Izadkhasti, H. (2020). Applying Political Business Cycle to Explain Macroeconomic Policies in Iran: A Public Choice Perspective. International Journal of New Political Economy, 1(2), 175-197. doi: 10.29252/jep.1.2.175

MLA

Hojat Izadkhasti. "Applying Political Business Cycle to Explain Macroeconomic Policies in Iran: A Public Choice Perspective". International Journal of New Political Economy, 1, 2, 2020, 175-197. doi: 10.29252/jep.1.2.175

HARVARD

Izadkhasti, H. (2020). 'Applying Political Business Cycle to Explain Macroeconomic Policies in Iran: A Public Choice Perspective', International Journal of New Political Economy, 1(2), pp. 175-197. doi: 10.29252/jep.1.2.175

VANCOUVER

Izadkhasti, H. Applying Political Business Cycle to Explain Macroeconomic Policies in Iran: A Public Choice Perspective. International Journal of New Political Economy, 2020; 1(2): 175-197. doi: 10.29252/jep.1.2.175

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