Political Business Cycle (Case Study of Iran)

Political business cycle explains the business cycle base on the mutual voters and government behavior. Base on this theory the economic factors have a main role in analyzing voters behavior patterns and the government try to satisfy the voters and increase its reselection probability by choosing different economic politic. The researchs have been done show that, the voters analyzing of economic variables such as inflation, unemployment, economic growth and etc. have a main role on people decision to reselect or refuse of old party president candidates. The Nordhuse article was a most influence article in this theme that had developed and revised by Fry, Ramzer and Leacher. These researchers try to explain the way by which the government control the inflation and unemployment variables in the path that maximize their reselection probability. In this article base on annual data (1988-2005) we test Nordhuse and Lechear hypotheses subject to inflation and unemployment in Iran economics. the conclusion support the Lechear hypotheses about Iran economics namely the government in two first years chose expansionary monetary policy to decrease the unemployment flow that the inflation ratio raise, then to win and reselect this government in another election, in two later years the government try to decrease the inflation by choosing contracted policy.