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The Political Business Cycles of EU Accession Countries

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  • Mark Hallerberg

    (University of Pittsburgh)

  • Lúcio Vinhas de Souza

    ()
    (Erasmus University Rotterdam)

Abstract

This paper considers whether political business cycles exist in Eastern European accession countries.Section I introduces the overall objectives of the work. Section II provides a short introductionto the political business cycle literature. It also considers the role of exchange rates, capitalmobility, and central bank independence in restricting or encouraging political business cycles.Section III lays out the accession process to date as well as the exchange rate regimes accessionstates have used. Section IV tests empirically whether there have been political business cyclesduring the time period 1990 to 1999 for the 10 Eastern European accession countries, with estimationsbased on a Mundell-Fleming model. It finds that countries with flexible exchange rates have loosermonetary policies in election years than in non-election years in countries with dependent centralbanks. If a country has a fixed exchange rate regime, it manipulates its economy in election yearsthrough running larger budgets instead of through looser monetary policy. Section V concludes withsome policy implications for the European Union's enlargement process and EMU.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 00-085/2.

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Date of creation: 23 Oct 2000
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Handle: RePEc:dgr:uvatin:20000085

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References

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  1. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 125-176, 04.
  2. Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of European Monetary Unification," CEPR Discussion Papers 643, C.E.P.R. Discussion Papers.
  3. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
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Cited by:
  1. Przemysław Pacześ, 2012. "Polityczny cykl koniunkturalny w Europie Środkowo-Wschodniej [ Political Business Cycle in Central and Eastern Europe ]," Prace i Materiały, Instytut Rozwoju Gospodarczego (SGH), vol. 88(1), pages 119-139.
  2. repec:cge:warwcg:84 is not listed on IDEAS
  3. Lucio Vinhas de Souza, 2002. "Integrated monetary and exchange rate frameworks: are there empirical differences?," Bank of Estonia Working Papers 2002-2, Bank of Estonia, revised 12 Oct 2002.
  4. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
  5. Mehari Mekonnen Akalu, 2002. "Measuring and Ranking Value Drivers," Tinbergen Institute Discussion Papers 02-043/2, Tinbergen Institute.
  6. Eichengreen, Barry, 2003. "The Accession Economies’ Rocky Road to the Euro," Institute of European Studies, Working Paper Series qt07h5c51w, Institute of European Studies, UC Berkeley.
  7. Rafal Benecki & Jens Hölscher & Mariusz Jarmuzek, 2006. "Fiscal Transparency And Policy Rules In Poland," Working Papers 65, CENTRE FOR THE STUDY OF ECONOMIC AND SOCIAL CHANGE IN EUROPE,School of Slavonic and East European Studies,University College London (SSEES,UCL).
  8. 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.
  9. Marko Klašnja, 2008. "Electoral Rules, Forms of Government, and Political Budget Cycles in Transition Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(2), pages 185-218, June.
  10. Jula, Dorin, 2008. "Economic Impact of Political Cycles – The Relevance of European experinces for Romania," Working Papers of Institute for Economic Forecasting 081101, Institute for Economic Forecasting.
  11. Christian Fahrholz, 2003. "Strategic Exchange-Rate Policy of Accession Countries in ERM II," Eastward Enlargement of the Euro-zone Working Papers wp14, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Apr 2003.

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