ABSTRACT
This chapter argues that in reality the political business cycle has neither a strong theoretical basis nor strong empirical support. It views that such 'political' influences can successfully be subsumed within a random disturbance term which is unlikely to provide a payoff to further econometric investigation. The chapter examines the main components of public sector expenditure and revenue to see if they evidence electoral cyclical behavior. Nordhaus paper really falls into two distinct parts. They are: puts forward a justification for the view that 'democracy' causes inflation, presents a model of the political cycle in which it is deduced that unemployment falls continuously throughout electoral terms and inflation rises continuously. The chapter follows Macrae's methodology for the five major electoral periods in the U.K. between 1951 and 1974. It concludes that the political business cycle is something that the economics profession in the U.K. need not take too seriously.
