Housing Starts and the Political Business Cycle

The political business cycle (PBC) literature has, generally, been characterized by a relatively narrow set of economic variables and by unidirectional causal analysis. I challenge both of these traditional constructions. First, I expand the search by examining a surprisingly understudied component of the political economy: the housing market. As a vital component of the American macroeconomy, housing is an uncharacteristically powerful tool for politicians and political analyses alike. Second, I use vector autoregression to more accurately model the dynamic and reciprocal nature of the economic and political interrelations found in PBCs. I find significant evidence of PBCs in the U.S. housing market from 1959 to 2005.