ABSTRACT
This chapter describes the primary types of existing theoretical Political Business Cycle (PBC) models, followed by a discussion of the underlying macroeconomic structure and the institutional features of monetary and fiscal policymaking. It provides a review of the empirical literature, examines the relevance of PBC models for developing countries, and outlines some suggestions for future research. The implicit or explicit assumption of both electoral and ideological PBC models is that policymakers can manipulate the economy to affect economic outcomes. The macroeconomic structure on which PBC models usually build always reflect the outcome of many abstractions. Theoretical models of the PBC have stimulated a large number of empirical studies. Research on PBCs has produced many different theoretical models that incorporate different sets of assumptions about the macroeconomy, about the behavior and rationality of voters and politicians, about the motives and degree of competence of politicians.
