Using real-time data to test for political budget cycles
AbstractWe 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 InfoPaper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 12010-EEF.
Date of creation: 2012
Date of revision:
Other versions of this item:
- Jakob de Haan & Richard Jong-A-Pin & Jan-Egbert Sturm, 2012. "Using Real-Time Data to Test for Political Budget Cycles," KOF Working papers 12-313, KOF Swiss Economic Institute, ETH Zurich.
- Richard Jong-A-Pin & Jan-Egbert Sturm & Jakob de Haan, 2012. "Using Real-Time Data to Test for Political Budget Cycles," CESifo Working Paper Series 3939, CESifo Group Munich.
- 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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