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Abstract
Political cycle theory hypothesizes that politicians alter economic policy and economic
performance to improve their chance for reelection or to enact their partisan preferences. A
recent wave of studies has posited that such effects should be stronger in developing countries
than OECD countries, due to higher levels of poverty, lower levels of information, and lower
levels of political institutionalization. In this paper I evaluate this argument by comparing political
cycles in the OECD with political cycles in Latin America, Asia, and Africa. The analysis
utilizes cross-sectional time-series, including quarterly data from 1975 to 2000 in 116 countries.
The findings suggest that with respect to wide variety of economic outcomes and
economic policies, political business cycles are ubiquitous in Latin America yet rare in all other
regions of the world. These findings suggest that it is not poverty per se that drives political
business cycles, but rather something specific to the Latin American context. The concluding
section notes that this finding is consistent with the ‘macroeconomic populism’ thesis that Latin
American countries exhibit greater pressures for policy-induced macroeconomic disequilibrium
than other regions of the world.
Convention