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A new view into political business cycles: Household behaviour in Albania

Author

Listed:
  • Endrit Lami

    (Budapest University of Technology and Economics (BME), Budapest, Hungary
    Ministry of Finance, Tirana, Albania)

  • Holger Kächelein

    (Bavarian Virtual University (Virtuelle Hochschule Bayern - VHB), Bamberg, Germany
    Southeast Europe Center for Economic Development (SECED), Tirana, Albania)

  • Drini Imami

    (Agriculture University of Tirana, Faculty of Economics and Agribusiness, Tirana, Albania)

Abstract

Over the last decades, there has been plenty of research and publications on Political Business Cycles (PBC), aimed at analysing and explaining the use of fiscal and monetary instruments to stimulate economic growth before elections, with the intention of impressing potential voters. Previous research on PBC in Albania reveals clear evidence of fiscal expansion before elections, but no significant changes in GDP and inflation as theory predicts. One possible explanation of this result could be economic agents’ expectations, which is the subject of this paper. We analyse consumers’ expectations before elections, the main factors underlying expectations, and the way in which these expectations influence their behaviour toward spending, and consequently the macroeconomic outcomes, deploying standard econometric methods widely applied in PBC related research. According to our research results, households’ consumption spending decreases before elections because of the higher uncertainty about their future economic situation due to the highly politicised public employment.

Suggested Citation

  • Endrit Lami & Holger Kächelein & Drini Imami, 2014. "A new view into political business cycles: Household behaviour in Albania," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 201-224, November.
    • Handle: RePEc:aka:aoecon:v:64:y:2014:i:supplement1:p:201-224
    Note: The views expressed herein are solely those of the author and do not reflect the views of the Ministry of Finance in Albania.
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    Citations

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    Cited by:

    1. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    2. Mohsen Bahmani-Oskooee & Ilir Miteza & Altin Tanku, 2020. "Exchange rate changes and money demand in Albania: a nonlinear ARDL analysis," Economic Change and Restructuring, Springer, vol. 53(4), pages 619-633, November.
    3. Halebić Jasmin & Moćević Amina, 2020. "Analysis of Public Debt at Subnational Government Levels: Evidence from Cantons in the Federation of Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 15(2), pages 109-123, December.
    4. Lami, Endrit & Imami, Drini & Kächelein, Holger, 2016. "Fuelling political fiscal cycles by opportunistic privatization in transition economies: The case of Albania," Economic Systems, Elsevier, vol. 40(2), pages 220-231.
    5. Ardian Harri & Drini Imami & Edvin Zhllima, 2022. "The Effect Of The Covid-19 Pandemic On Consumer Savings And Retail Sales: Evidence From A Postcommunist Transition Economy," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 67(233), pages 39-60, April – J.
    6. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    7. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.

    More about this item

    Keywords

    political business cycle; household behaviour; elections; Albania;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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