THE CANADIAN POLITICAL BUSINESS CYCLE

• Main Author: Barbara Libby
• Format: Article
• Language: English
• Published: Economic & Business History Society 2000-06-01
• Series: Essays in Economic and Business History
• Online Access: https://www.ebhsoc.org/journal/index.php/ebhs/article/view/279

This paper will discuss the existence of a Canadian Political Business Cycle (PBC) during the period 1946-1989. Logit analysis was used to determine if changes in the unemployment rate, growth of real GNE and the rate of inflation are significantly different in the period before an election than during the rest of the electoral term. It was found that the rate of growth in the unemployment rate declines and the rate of growth of real GNP increases in the four quarters before an election. The behavior of these variables reverses in the period after an election. These findings are consistent with a political business cycle. Policy variables, under a majority government, also behave in a manner associated with a PBC, with the government stimulating the economy approximately two years into its term so that good economic news will occur before it has to call an election. Minority governments tend to simulate the economy immediately after taking office.