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This paper develops a theory of the political calculus behind macroeconomic policymaking in a financially globalized world. It seeks to explain a fascinating puzzle: why has much of Latin America's left maintained a commitment to macroeconomic orthodoxy? Employing elections as my unit of analysis, I challenge the conventional claim the chief executives engineer an economic boom to win elections. Rather, I argue that in a financially globalized world, politicians face greater policymaking constraints that stem from their exposure to international debt markets and an increasingly sophisticated electorate. They often prefer to use macroeconomic discipline to signal their competence to both investors and the electorate, particularly in light of past hyperinflation and debt crises. Ironically, politicians who presumably face fewer institutional checks and balances, constrain their own executive power to demonstrate macroeconomic policy accountability. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]

This paper seeks to explain a fascinating puzzle: why have many of Latin America's chief executives maintained macroeconomic discipline in the lead-up to elections? Political-economic theory uniformly assumes that Latin American politicians are opportunistic and institutionally weakly constrained, and will use whatever means necessary to secure an electoral victory. Given weak legislatures, less than fully autonomous central banks, and a constrained media, the prediction is that leaders will employ macroeconomic policy as a electoral weapon. They are expected to hit the economy's gas pedal before elections, calculating that an accelerated economy-even at the cost of higher price instability- will yield more votes. But Latin American economies do not shift into a high-growth, high-inflation phase before elections. In fact, I show that politicians take the opposite actions from the ones this theory would predict: in recent decades, before elections they hit the brakes. My large-N test of 17 Latin American countries (observed between 1961 and 2006) finds that after the 1980s Latin American economies did not undergo political business cycles. What explains this surprising fact? I argue that two key structural shocks--the region's 1990 debt restructurings and its past struggles with hyperinflation--account for this unexpected change in political behavior. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]

A conference paper about a cross-national comparison of political business cycles is presented. The argument that the effects of political cycle theory is stronger in developing countries than OECD countries due to higher levels of poverty is explored. It compares the political cycles in the OECD with political cycles in Latin America, Asia and Africa using cross-sectional time-series. Results suggest that political business cycles are ubiquitous in Latin America with respect to wide variety of economic outcomes.