Abstract
This paper develops a political-economic interaction model for India for the 1960-91 sample period. India presents an ideal case for testing the political business cycle theory in the context of a parliamentary democracy with endogenous election timing. Using a mixed qualitative and continuous variable simultaneous equation estimation procedure, the paper considers the two-way interaction that results from the control by the cabinet over election timing. Several conclusions can be derived from this study. First, the results indicate the presence of business cycle-electoral interaction in India. Second, there is strong support for the surfing hypothesis, implying that the Indian cabinet tends to ride on natural business waves. Third, no support is found for the manipulative hypothesis.
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