Are there Political Budget Cycles in the Euro Area?
AbstractThis article examines whether there is a political budget cycle (PBC) in countries in the euro area. Using a multivari ate model for 1999â€“2004 and various election indicators we find strong evidence that, since the start of the Stability and Growth Pact, fiscal policy-makers in the euro area have pursued expansionary policies before elections. In an elec tion year â€“ but not in the year prior to the election â€“ the budget deficit increases. This result is in line with third-generation PBC models, which are based on moral hazard. We also find a significant but small partisan effect on fiscal policy outcomes.
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Bibliographic InfoArticle provided by in its journal European Union Politics.
Volume (Year): 7 (2006)
Issue (Month): 2 (June)
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- Mark Mink & Jakob de Haan, 2005. "Has the Stability and Growth Pact Impeded Political Budget Cycles in the European Union?," CESifo Working Paper Series 1532, CESifo Group Munich.
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