We develop a theoretical framework in which political and economic cycles are jointly determined. These cycles are driven by three political economy frictions: policymakers are non-benevolent, they cannot commit to policies, and they have private information about the tightness of the government...

We present a model of political budget cycles in which incumbents influence voters by targeting government spending to specific groups of voters at the expense of other voters or other expenditures. Each voter faces a signal extraction problem: being targeted with expenditure before the election...

By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up because the policy eliminates the danger. Mechanically, high taxes...

The post-war United States exhibits two rather strong politico-economic regularities. The political regularity is that the party of the President has always lost votes in aid-term Congressional elections, relative to its Congressional vote in the previous elections; the economic regularity is...

Politicians have generally two motives: they wish to hold office as long as possible and wish to implement their preferred policies. Thus they face a trade-off between the policies which maximize their choices of reelection and their most preferred policies (or the policies most preferred by the...

Prior to elections, governments (at all levels) frequently undertake a consumption binge. Taxes are cut, transfers are raised, and government spending is distorted towards highly visible items. The "political business cycle" (better be thought of as "the political budget cycle") has been...