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Standard real business cycle theory predicts consumption should be smoother than output, as observed in developed countries. In this paper we provide a novel explanation of the consumption volatility puzzle based on political frictions. We develop a dynamic stochastic political economy model where parties that disagree on the size of government (right-wing and left-wing) alternate in power and face aggregate uncertainty. While productivity shocks only affect consumption through responses todoi:10.2139/ssrn.1866431 fatcat:dqp32rca4zasfa3pmg3ia444ua