Page 63 - Management Digest Udyama Vol 1 Isuue 2

Figure 1: Sri Lankan Inflation (1995-2020)

Figure 1 depicts the characteristics A similar trend is shown even
of political business cycle around the seventh general
theory as the inflation rates are election and the sixth presidential
comparatively meager in the election in 2010. According to
election periods and increases the above Figure, the behavior
soon after most of the time. For of the inflation rate during 2015
instance, the fourth presidential recalls the properties of the
election was held in December political business cycle as of the
1999. According to Figure 1, political business cycle as the
inflation has reduced in that seventh presidential election and
particular year and has increased eighth general election were held
afterward. Subsequently, the in January and August 2015,
country’s fourth and fifth general respectively. The period from late
elections were held in 2000 and 2019 to early 2020 also depicts
2001, respectively. During this significantly lower inflation. This
period also the inflation rate has lower inflation may be due to the
significantly reduced. According presidential and general elections
to the above Figure, the inflation held during that period. All in all,
rate shows a shallow value in this monitory policy variable’s
2003 as well. This behavior once past behavior might provide
again evidences the presence of a evidence for possible political
possible political business cycle business cycle effect in Sri Lanka
effect during the local government as the inflation rate seems well-
election held in 2003, which was controlled, especially in the
a crucial election in Sri Lankan election periods.
political history.

The sixth general election held in
April 2004 is considered one of
the significant turning points as
an incumbent loss was recorded.
During this election period,
inflation has also been managed
at a lower level and has increased
significantly after that.

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