This paper reviews the theory of political business cycle, which analyzes the interaction of political and economic system, paying special attention to the most influential works on it. This literature has developed in two distinct phases. The first phase is shaped, in the mid-seventies, by Nordhaus (1975) and Lindbeck (1976) on 'opportunistic' cycles, and by Hibbs (1977) on 'partisan' cycles. The common features of the works in this phase are that the economy is defined by a 'pre-rational expectations' model and that an exploitable Phillips curve is used. The second phase took off in the mid-eighties as a branch of game-theoretic approach to the positive theory of policy. In this phase, Cukierman and Meltzer (1986), Rogoff and Sibert (1988), Rogoff (1990), and Persson and Tabeliini (1990)propose 'rational opportunistic' models; Alesina (1987) develops a 'rational partisan' approach.
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