Presidential party affiliation and electoral cycles in the US economy: Evidence from party changes in adjacent terms

Unique evidence presented in this study challenges previous findings about presidential politics and business cycles. Prior studies find strong evidence for a Democratic economic growth advantage of about 1.8% per year over the course of a term but only weak evidence for a pre-election surge in growth for incumbent Presidents of either party. This study finds a much smaller Democratic advantage and strong evidence for a pre-election growth surge for Republican Presidents relative to Democratic Presidents. The novelty of these results is attributable to the use of repeated party-change reversals in adjacent terms for identification in place of binary changes in isolated terms separated by as much as a half-century in prior studies. We find a strongly partisan Federal Reserve effect on growth as well. Results are insensitive to an extensive battery of robustness checks.