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Temporal aggregation in political budget cycles

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  • Jorge M. Streb
  • Daniel Lema

Abstract

While existing cross-country studies on political budget cycles rely on annual data, we build a panel with quarterly and monthly data from Latin American and OECD countries over the 1980-2005 period. Disaggregated data allow to center the electoral year more precisely, and show the effects are concentrated in a three-quarter window around elections. Cycles are statistically significant only in Latin America, but the pattern is similar to OECD countries: the budget surplus/GDP ratio falls in the election period and rises in the post-election period. In line with the logic of rational opportunistic manipulation, these effects cancel out.

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Bibliographic Info

Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 403.

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Length: 39 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:cem:doctra:403

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Keywords: temporal aggregation; electoral window; pre- and post-electoral effects; political budget cycles; rational opportunistic cycles;

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References

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  1. Jorge M. Streb & Daniel Lema & Gustavo Torrens, 2009. "Checks and Balances on Political Budget Cycles: Cross-Country Evidence," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 62(3), pages 426-447, 08.
  2. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in A Young Democracy Setting," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(4), pages 1301-1338, November.
  3. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  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, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  5. Adi Brender & Allan Drazen, 2004. "Political Budget Cycles in New versus Established Democracies," NBER Working Papers 10539, National Bureau of Economic Research, Inc.
  6. Jorge M. Streb & Gustavo F. Torrens, 2009. "Making rules credible: Divided government and political budget cycles," CEMA Working Papers: Serie Documentos de Trabajo., Universidad del CEMA 395, Universidad del CEMA.
  7. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, Elsevier, vol. 90(8-9), pages 1367-1389, September.
  8. Fernandez, Roque B, 1981. "A Methodological Note on the Estimation of Time Series," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 471-76, August.
  9. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  10. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, Elsevier, vol. 50(6), pages 1403-1439, August.
  11. Lorena Barberia & George Avelino, 2011. "Do political budget cycles differ in Latin American democracies?," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  12. Schuknecht, Ludger, 1996. "Political Business Cycles and Fiscal Policies in Developing Countries," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 49(2), pages 155-70.
  13. Susanne Lohmann, 1998. "Rationalizing the Political Business Cycle: A Workhorse Model," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 10(1), pages 1-17, 03.
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Cited by:
  1. Jorge M. Streb & Daniel Lema & Pablo Garofalo, 2013. "Electoral cycles in international reserves: Evidence from Latin America and the OECD," CEMA Working Papers: Serie Documentos de Trabajo., Universidad del CEMA 526, Universidad del CEMA.
  2. Daniel Lema & Jorge M. Streb, 2013. "Ciclos electorales en política fiscal," CEMA Working Papers: Serie Documentos de Trabajo., Universidad del CEMA 514, Universidad del CEMA.

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