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Political Budget Cycles: A Review of Recent Developments

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  • Min Shi
  • Jakob Svensson

Abstract

This paper provides a review of recent developments in the theory and evidence of political budget cycles. Specifically, we discuss three areas where significant progress has been made. First, new theoretical explanations (models) have been proposed where political budget cycles arise as the result of a moral hazard problem between the government and the electorate. Second, more sophisticated empirical methods, in particular, time series methods appropriate for dynamic panel data regressions, have been adopted in cross-country analyses. Last but not least, the focus of recent studies has shifted from industrialized countries to all (including developing) countries, and from the existence of political budget cycles to the magnitude and composition (revenue vs. spending) of these cycles.

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Bibliographic Info

Article provided by Nordic Journal of Political Economy in its journal Nordic Journal of Political Economy.

Volume (Year): 29 (2003)
Issue (Month): ()
Pages: 67-76

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Handle: RePEc:noj:journl:v:29:y:2003:p:67-76

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Web page: http://www.nopecjournal.org

Related research

Keywords: Political budget cycles; dynamic panel estimation; developing countries;

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  1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  2. Shi, Min & Svensson, Jakob, 2002. "Conditional Political Budget Cycles," CEPR Discussion Papers 3352, C.E.P.R. Discussion Papers.
  3. Schuknecht, Ludger, 1996. "Political Business Cycles and Fiscal Policies in Developing Countries," Kyklos, Wiley Blackwell, vol. 49(2), pages 155-70.
  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  5. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
  6. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  7. Block, Steven A., 2002. "Political business cycles, democratization, and economic reform: the case of Africa," Journal of Development Economics, Elsevier, vol. 67(1), pages 205-228, February.
  8. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  9. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
  10. Schuknecht, Ludger, 2000. " Fiscal Policy Cycles and Public Expenditure in Developing Countries," Public Choice, Springer, vol. 102(1-2), pages 115-30, January.
  11. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
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