A commentary on “Does the Fed contribute to a political business cycle?”
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Abrams and Iossifov (2006) find that during 1957–2004, monetary policy turned significantly more expansionary prior to U.S. presidential elections when the Federal Reserve chairman and the incumbent president belonged to the same political party. However, their long sample period obscures changes in trends during the period stemming from advances in macroeconomic theory and in the implementation of monetary policy. Indeed, when one considers only the Volcker–Greenspan era (1979–2004), there is insufficient evidence to accept the notion of a political business cycle effect.
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