The Presidential Business Cycle 1949-2022: an Examination and Reappraisal

Abstract This paper examines the relationship between the president’s political party and the national economy from 1949 to 2022. Changes in GDP, unemployment, national debt, and the debt-to-GDP ratio are used to measure national economic performance with the Standard and Poor 500 and Dow Jones Industrial Average as measures of stock market performance. A number of statistical tests were used to examine whether the incumbent president’s party has any significant impact on the variables we examined. We tested differences in the change or percent change of each variable with one-way analysis of variance (ANOVA) using the president’s party as two alternative treatments. Linear regressions were used to identify simultaneous relationships between economic performance measures and the party in the White House. Pairwise Granger causality tests were used to identify lagged relationships. We find that both the S&P 500 and the DJIA have positive relationships with GDP while GDP has a positive relationship with the national debt. In turn, government debt has a statistically significant, positive relationship with unemployment. Finally, though somewhat puzzlingly, unemployment has a positive relationship with GDP. JEL codes: D72, E01, E30, E32, P17.