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Political cycles under external economic constraints: Evidence from Cyprus

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  • Efthyvoulou, Georgios

Abstract

This paper examines the presence of political cycles in a small open economy using data from Cyprus over the period 1978–2006, and explores their conditionality upon external economic constraints, such as globalization and European integration. Two basic results emerge. First, we find evidence of partisan shifts in economic policies and outcomes, although these effects seem to decrease as globalization progresses, and to disappear in the run-up to EMU. This implies that, while partisan cycles can emerge under a certain domestic political setting, the sensitivity of an economy to globalization pressures and the challenges resulting from EU/EMU membership can lead to their weakening. Second, we find evidence of electoral shifts in certain, more visible, subcomponents of the fiscal balance. However, in contrast to partisan distinctions, these opportunistic effects become more pronounced as globalization proceeds. It seems that constraints imposed on the ability of politicians to ingratiate themselves with partisans, may actually strengthen their incentives to engage in electioneering.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 63 (2011)
Issue (Month): 6 ()
Pages: 638-662

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Handle: RePEc:eee:jebusi:v:63:y:2011:i:6:p:638-662

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Web page: http://www.elsevier.com/locate/jeconbus

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Keywords: Political cycles; Small-open economy; External economic constraints; Globalization; Cyprus; European Union;

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Cited by:
  1. Georgios Efthyvoulou, 2012. "Political budget cycles in the European Union and the impact of political pressures," Public Choice, Springer, vol. 153(3), pages 295-327, December.
  2. Vincenzo Bove & Georgios Efthyvoulou, 2013. "Political Cycles in Public Expenditure: Butter vs. Guns," Working Papers 2013016, The University of Sheffield, Department of Economics.
  3. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers 10-10, Carleton University, Department of Economics.

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