Cyclically balanced paths in a model of economic growth with endogenous policy switching

Balanced growth paths are typical research subjects for models of macroeconomic dynamics. Balanced growth paths are model solutions that assume constant policy parameters (such as tax rate) and allow for monotonous and proportional growth of model components. In this paper, we construct and test a model with policy switching based on economic retrospective voting: the model allows to switch parties in office if an electorally important indicator exhibits decline. A change of ruling party brings about a change in policy. If the second party is then voted out of the office, the system experiences endogenous policy switching. Within this framework, we introduce the term "cyclically balanced growth paths", i.e. non-monotonous solutions where the proportionality of components is broken and then restored every political cycle. We conduct the analysis using differential equations theory and numerical experiments.