Paths to a political business cycle

Illustration: Ajay Mohanty

How does our thinking about macroeconomics change in an election year? Public choice theory assumes that the state consists of individuals who maximize their self-interest. Elections are an important point of attention for politicians. The idea of ​​the ‘political business cycle’ envisages certain forms of policy action before and after elections, which provide impetus to the macroeconomy. Our ability to understand these phenomena helps us better interpret economic conditions and developments.

The biggest levers of the macroeconomy, fiscal and monetary policy, are the first point of contact when thinking about the political business cycle. There are patterns of this in advanced economies

First print: April 14, 2024 | 10:17 PM IST