Economic Development and Political Cycles in Romania

Political business cycle theory is one of the more controversial issues of modern economic theory. According to economic theory, economic policy adopted by each government before elections, is an expansionary one, leading to lower taxes and unemployment and to increase consumption per capita, GDP and the subsidies granted by government. After each election the government adopts a restrictive policy. This paper presents main models used to describe and analyze political and economic cycles. The final part of our paper analyzes Romanian political and there influence on economic development based on regression models. Analyzing 1990-2008 periods we conclude that Romanian's economy was affected by political decisions especially in election periods.