The Impact of Electoral Cycle Occurrence on Macroeconomic Environment: Case Study of Iran

The Political business cycle theory is one of the controversial topics in modern economic theory. The political business cycle, as a political factor, influences the trends of economic variables. According to economic theories, the economic policy adopted by government before election, is an expansionary one, leading to lower taxes and unemployment; it also increases consumption per capita, GDP, and the subsidies granted by the government. However, after each election, the government adopts a restrictive policy. This paper introduces the major models used to describe and analyze political and economic cycles. Moreover, Iranchr('39')s political cycles and their impact on economic development are analyzed based on the BVAR model for the period 1979-2015. According to the analysis, it is concluded that the economic variables, particularly inflation and exchange rate, are under the influence of political decisions, specifically during the election period.