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Abstract

We use real-time annual data on the fiscal balance, government current spending, current revenues and net capital outlays as published at a half yearly frequency in the OECD Economic Outlook for 25 OECD countries. For each fiscal year t we have a number of forecasts, a first release, and subsequent revisions. It turns out that revisions in the fiscal balance data are not affected by elections. However, we do find that governments spend more than reported before an election which provides support for moralhazard type of political budget cycle (PBC) models: through hidden efforts the incumbent tries to enhance his perceived competence. We also find that governments had higher current receipts than reported before an election, which is in line with adverse-selection type of PBC models in which incumbents signal competence through expansionary fiscal policy before the elections.

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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 12010-EEF.

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Date of creation: 2012
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Handle: RePEc:dgr:rugsom:12010-eef

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Find related papers by JEL classification:

• D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
• H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
• H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
• P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

This paper has been announced in the following NEP Reports:

• NEP-ALL-2012-10-27 (All new papers)
• NEP-MAC-2012-10-27 (Macroeconomics)
• NEP-PBE-2012-10-27 (Public Economics)
• NEP-POL-2012-10-27 (Positive Political Economics)

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1. Jacopo Cimadomo, 2011. "Real-time data and fiscal policy analysis: a survey of the literature," Working Paper Series 1408, European Central Bank.
   
   • Jacopo Cimadomo, 2011. "Real-Time Data and Fiscal Policy Analysis: a Survey of the Literature," Working Papers 2011-20, CEPII research center.
   • Jacopo Cimadomo, 2011. "Real-time data and fiscal policy analysis: a survey of the literature," Working Papers 11-25, Federal Reserve Bank of Philadelphia.
2. Min Shi & Jakob Svensson, 2003. "Political Budget Cycles: A Review of Recent Developments," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 29, pages 67-76.
3. Athanasios Orphanides & Simon van Norden, 1999. "The Reliability of Output Gap Estimates in Real Time," Macroeconomics 9907006, EconWPA.
   
   • Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
   • Athanasios Orphanides & Simon Van_Norden, 2000. "The Reliability of Output Gap Estimates in Real Time," Econometric Society World Congress 2000 Contributed Papers 0768, Econometric Society.
   • Athanasios Orphanides & Simon van Norden, 1999. "The reliability of output gap estimates in real time," Finance and Economics Discussion Series 1999-38, Board of Governors of the Federal Reserve System (U.S.).
   • Athanasios Orphanides & Simon van Norden, 2001. "The Unreliability of Output Gap Estimates in Real Time," CIRANO Working Papers 2001s-57, CIRANO.
4. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September.
5. Georgios Efthyvoulou, 2010. "Political Budget Cycles in the European Union and the Impact of Political Pressures: A dynamic panel regression analysis," Birkbeck Working Papers in Economics and Finance 1002, Birkbeck, Department of Economics, Mathematics & Statistics.
   
   • 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.
6. Roel Beetsma & Massimo Giuliodori & Peter Wierts, 2009. "Planning to cheat: EU fiscal policy in real time," Economic Policy, CEPR & CES & MSH, vol. 24, pages 753-804, October.
7. Tilman Brück & Andreas Stephan, 2005. "Do Eurozone Countries Cheat with Their Budget Deficit Forecasts?," Discussion Papers of DIW Berlin 508, DIW Berlin, German Institute for Economic Research.
   
   • Tilman Brück & Andreas Stephan, 2006. "Do Eurozone Countries Cheat with their Budget Deficit Forecasts?," Kyklos, Wiley Blackwell, vol. 59(1), pages 3-15, 02.
   • Stephan, Andreas & Brück, Tilman, 2005. "Do Eurozone Countries Cheat with their Budget Deficit Forecasts?," Working Paper Series 2005,5, European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe.

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