MonetarismAnd the Political Business Cycle

Monetarism MV = PQ

18-30 months

In the long run, increases in M affect nothing but P (and W).

Monetarism MV = PQ

18-30 months

In the short run, increases in M affect Q---but only temporarily.

Monetarism MV = PQ

In the short run, increases in M affect Q---but only temporarily.

Monetarism MV = PQ

In the short run, increases in M affect Q---but only temporarily.

Monetarism MV = PQ

In the short run, increases in M affect Q---but only temporarily.

The Political Business Cycle

1972 Nixon vs. McGovern

1976 Ford vs. Carter

1980 Carter vs. Reagan

1984 Reagan vs. Mondale

1988 Bush vs. Dukakis

1992 Bush vs. Clinton

1996 Clinton vs. Dole

2000 Gore vs. Bush

2004 Bush vs. Kerry

Now, pick the elections in which one of the candidates was the sitting president.

The Political Business Cycle

1972 Nixon vs. McGovern

1976 Ford vs. Carter

1980 Carter vs. Reagan

1984 Reagan vs. Mondale

1988

1992 Bush vs. Clinton

1996 Clinton vs. Dole

2000

2004 Bush vs. Kerry

PBC game (good timing)

PBC game (good timing)

PBC game (good timing)

The Political Business Cycle

1972 Nixon vs. McGovern

1976 Ford vs. Carter

1980 Carter vs. Reagan

1984 Reagan vs. Mondale

1988

1992 Bush vs. Clinton

1996 Clinton vs. Dole

2000

2004 Bush vs. Kerry

PBC game (good timing)

PBC game (good timing)

PBC game (good timing)

PBC game (good timing)

PBC game (good timing)

PBC game (good timing)

The Political Business Cycle

1972 Nixon vs. McGovern

1976 Ford vs. Carter

1980 Carter vs. Reagan

1984 Reagan vs. Mondale

1988

1992 Bush vs. Clinton

1996 Clinton vs. Dole

2000

2004 Bush vs. Kerry

PBC game (good timing)

Didn’t play the PBC game

PBC game (too early)

PBC game (good timing)

PBC game (too late)

PBC game (good timing)

Couldn’t play the PCB game

PBC game (good timing)

PBC game (good timing)

PBC game (good timing)

The Political Business Cycle

1972 Nixon vs. McGovern

1976 Ford vs. Carter

1980 Carter vs. Reagan

1984 Reagan vs. Mondale

1988

1992 Bush vs. Clinton

1996 Clinton vs. Dole

2000

2004 Bush vs. Kerry

PBC game (good timing)

Didn’t play the PBC game

PBC game (too early)

PBC game (good timing)

PBC game (too late)

PBC game (good timing)

Couldn’t play the PCB game

PBC game (good timing)

PBC game (good timing)

PBC game (good timing)

The Political Business Cycle

1972 Nixon vs. McGovern

1976 Ford vs. Carter

1980 Carter vs. Reagan

1984 Reagan vs. Mondale

1988

1992 Bush vs. Clinton

1996 Clinton vs. Dole

2000

2004 Bush vs. Kerry

PBC game (good timing)

Didn’t play the PBC game

PBC game (too early)

PBC game (good timing)

PBC game (too late)

PBC game (good timing)

Couldn’t play the PCB game

And the Political Business Cycle

If you play the PBC game and get the timing right

(Nixon, 1972; Reagan, 1984; and Clinton; 1996, you’re likely to win.Otherwise, you’re likely to lose.

MonetarismAnd the Political Business Cycle