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This paper constructs and examines a macroeconomic model which combines features from both real and political business cycle models. We augment a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities. First, that on average the economy expands early under Democratic Presidents and contracts early under Republican Presidents. Second, that Presidents whose parties successfully retain the presidency have stronger than average growth in the second half of their terms. The model generates both of these featrues that conform to U.S. Post World War II data.

We investigate the empirical impact of violence as compared to other trade impediments on trade flows. Our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999, which brings together information from the Rose [2004] dataset, the ITERATE dataset for terrorist events, and datasets of external and internal conflict. We explore these data with traditional and theoretical gravity models. We calculate that, for a given country year, the presence of terrorism, as well as internal and external conflict is equivalent to as much as a 30 percent tariff on trade. This is larger than estimated tariffequivalent costs of border and language barriers and tariff-equivalent reduction through GSPs and WTO participation.

Data from 152 countries from 1950 to 1992 are used to estimate the joint determination of external conflict, internal conflict, and the business cycle. Results show that the occurrence of a recession alone will significantly increase the probability of internal conflict, and when combined with the occurrence of an external conflict, recessions will further increase the probability of internal conflict. These results are obtained from estimates of a Markov probability model in which transitions between states of peace and conflict influence each other and the state of the economy. Strong evidence emerges that the internal conflict, external conflict, and the state of the economy are not independent of one another. The results suggest that recessions can provide the spark for increased probabilities of internal and external conflict, which in turn raise the probability of recessions. Such dynamics are suggestive of a poverty-conflict trap-like environment.

Data from 152 countries from 1950 to 1992 are used to estimate the joint determination of external conflict, internal conflict, & the business cycle. Results show that the occurrence of a recession alone will significantly increase the probability of internal conflict, & when combined with the occurrence of an external conflict, recessions will further increase the probability of internal conflict. These results are obtained from estimates of a Markov probability model in which transitions between states of peace & conflict influence each other & the state of the economy. Strong evidence emerges that the internal conflict, external conflict, & the state of the economy are not independent of one another. The results suggest that recessions can provide the spark for increased probabilities of internal & external conflict, which in turn raise the probability of recessions. Such dynamics are suggestive of a poverty-conflict trap-like environment. 4 Tables, 29 References. [Copyright 2002 Sage Publications, Inc.]

This paper constructs and examines a macroeconomic model which combines features from both real and political business cycle models. We augment a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities: First, that on average the economy expands early under Democratic Presidents and contracts early under Republican Presidents. Second, that Presidents whose parties successfully retain the presidency have stronger than average growth in the second half of their terms. The model generates both of these features that conform to U.S. Post World War II data.