Political business cycles and economic growth in Africa

1. Introduction and background

For some decades now, economists have focused much of their attention on assessing macroeconomic variations as an interaction between government behavior and market forces. This led to the development of the models of political cycles. Political business cycles (PBCs) are cycles in macroeconomic variables such as inflation, unemployment, output, and so forth, which are caused by the electoral cycle. These models are categorized broadly into the “opportunistic” (electoralist) and the “partisan.” The “opportunistic” has it that all governments, irrespective of their ideological orientation, apply the same expansionary policies ahead of elections in order to increase their popularity and brighten their chances of being re-elected. The “partisan” proclaims that right-wing and left-wing governments select different policies and produce different results that reveal the preferences of their class-defined main political electorates. Thus, cycles are caused by differences among parties in their philosophy and economic goals.

With the “opportunistic” model, in the immediate period after elections, the government causes a recession through contractionary monetary policy to bring down inflationary anticipations. The incumbent government lowers economic activity so as to keep expected inflation low up to the time immediately before the next election, with the intention that a given rate of economic expansion as a result of a monetary surprise can be attained at a comparatively low inflation rate. The incumbent then stimulates the economy using expansionary monetary policy, causing unemployment to fall owing to the high unanticipated growth of money. Voter satisfaction is maximized by the levels of monetary expansion and unemployment in the election period. In the following election cycle, the same conduct is repeated, with a contractionary monetary policy to lower inflation expectations. Therefore, the likelihood of influencing the possibility of re-election, coupled with the economic structure, produces a cycle in economic activity which would be absent with a planner with an infinite vanishing point. Thus, the political cycle causes a cycle in inflation and economic activity.

According to Block (2002), Sub-Saharan Africa offers conducive ground for the study of PBCs because Africa is concurrently going through a prolonged process of economic reform. Block (2002) further stated that the period from 1989 to 1995 mark a vivid transition in the politics of Africa, marked particularly by improved political rivalry and leadership turnover....