The Encyclopedia of Public Choice

pp 736-740

Political Business Cycles

  • Thomas D. Willett
  • , Manfred W. Keil

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Few concepts in political economy are more widely known than the political business cycle (PBC). Nor have many given rise to such heated debate among scholars. The extent of debate reflects the highly mixed empirical evidence that has been found, but the heat of the debate has come largely from the challenge to the economists’ favorite assumption — rationality — posed by traditional formulations of the political business cycle theory. This in turn follows from the roles of macroeconomists and political scientists in the early contributions to political business cycle analysis. (For discussions of these see Drazen, 2000; Keech, 1995; Paldam, 1997).