Does Politics Matter in the Conduct of Fiscal Policy? Political Determinants of the Fiscal Sustainability: Evidence from Seven Individual Central and Eastern European Countries (CEEC)
Srdjan Redepagic () (Institute of Economic Sciences, Belgrade, Serbia; University of Nice Sophia-Antipolis, CEMAFI, France) Matthieu Llorca () (University of Burgundy, LEG/CEMF, France)
Abstract
This paper aims at assessing the fiscal sustainability and its political determinants in seven Central and Eastern European Countries (CEEC), namely Estonia, Latvia, Lithuania, Poland, Slovenia, Slovakia and the Czech Republic. First, using the recent sustainability approach of Bohn (1998) based on fiscal reaction function, econometric findings using Ordinary Least Squares (OLS) reveal a positive response of the primary surplus to changes in debt in several countries. In other words, fiscal policy is sustainable in Baltic countries, Slovenia and Slovakia, but not in Poland and in the Czech Republic. Second, by introducing political dummy variables, we test the electoral budget cycle and the partisan cycle theories. We find the presence of electoral and partisan cycle in Poland but not in the rest of our countries.
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Publisher Info
Paper provided by Faculty of economics, Department of Economics in its series Working Papers with number
200746.
Length: 11 pages Date of creation: Oct 2007 Date of revision:
Dec 2007 Publication status: Published in Panoeconomicus, December 2007, pages 489-500 Handle: RePEc:voj:wpaper:200746
Find related papers by JEL classification: E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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