Party ideology, elections and economic performance can have a significant impact on the overall economic performance. Governments are formed by parties that compete at elections and, based on their ideology, have different preferences regarding the size and scope of government. With respect to economic policy, left-wing parties advocate for government intervention in order to ease the effects of the business cycle whilst right-wing parties favour market solutions as a response to economic fluctuations. According to the partisan theory, left-wing parties are more willing to adopt expansionary fiscal and monetary policies when in government, as they are mainly concerned with employment. On the opposite side, right-wing parties prioritize inflation and fiscal discipline as objectives. Both left-wing and right-wing parties understand the impact that the economy has on their re-election prospects. When in government, in order to maximize their probability of being re-elected, all parties will try and make voters believe that their economic policies were successful. How the electorate will react to this behaviour depends on its ability to understand and predict the impact of current policies on future welfare. In this paper we examine the influence of government ideology and elections on the economy. Using quarterly data for government consumption, money supply, taxation and welfare expenditure, we find that both partisan and opportunistic political cycles characterize Australian politics thus confirming the insights put forward by Nordhaus, W.D. (1975. “The Political Business Cycle.” The Review of Economic Studies 42 (2): 169–190.) and Hibbs, D. (1977. “Political Parties and Macroeconomic Policy.” The American Political Science Review 7: 1467–1487).
The Journal of Time Series Econometrics (JTSE) serves as an internationally recognized outlet for important new research in both theoretical and applied classical and Bayesian time series, spatial and panel data econometrics. The scope of the journal includes papers dealing with estimation, testing and other methodological aspects involved in the application of time series and spatial analytic techniques to economic, financial and related data.