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Political Business Cycles and Partisan Politics: Evidence from a Developing Economy
Author(s) -
Köksal Bülent,
Çalışkan Ahmet
Publication year - 2012
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.2012.00397.x
Subject(s) - business cycle , volatility (finance) , economics , stock market , politics , left wing politics , conditional variance , stock (firearms) , financial economics , variance (accounting) , monetary economics , macroeconomics , political science , autoregressive conditional heteroskedasticity , mechanical engineering , paleontology , accounting , horse , biology , law , engineering
This paper explores whether the evidence supports the Political Business Cycle ( PBC ) theory, Partisan Theory ( PT ), and Rational Partisan Theory ( RPT ) using stock market data from Turkey, a rapidly growing developing economy. The results indicate that the PBC hypothesis is not supported by the data. We find permanent partisan effects in the conditional variance but not in returns. The conditional volatility of the returns is higher during the periods in which a leftist party or a coalition government is in office. We also find that the stock market returns temporarily decreases (increases) at the beginning of a right‐wing (left‐wing) government, providing evidence in favor of RPT .