Ideological Distance Among Parties and Macroeconomic Outcomes

This paper attempts to provide a single framework for bridging the separate research programs on opportunistic and partisan business cycles. Ideological distance, the degree of distance between the government and opposition on a left-right ideological spectrum, arguably could provide more leverage in understanding the conditions under which opportunistic and partisan business cycles are prominent. I develop a framework for hypothesizing that the effects of partisan business cycles are stronger when ideological distance is wide and opportunistic business cycles are stronger when ideological distance is narrow. I test these hypotheses on data for GDP growth, unemployment, and inflation from six industrialized democracies with plurality electoral systems. Tests for GDP growth confirm the hypotheses, while tests on unemployment data are partially supportive and the tests on inflation do not confirm the hypotheses