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Pakistan, Politics and Political Business Cycles

Listed author(s):
  • Gernot Sieg

    (TU Braunschweig, Economic Department, Spielmannstr, Braunschweig, Germany.)

  • Irem Batool

    (COMSATS Institute of Information Technology, Sahiwal)

This paper studies whether in Pakistan the dynamic behaviour of unemployment, inflation, budget deficit and real GDP growth is systematically affected by the timing of elections. We cover the period from 1973-2009. Our results can be summarised as follows: (1) Unemployment tends to be lower in pre-election periods and tends to increase immediately after elections, perhaps as a result of politically motivated employment schemes. (2) Inflation tends to be lower in pre-election periods, perhaps as a result of pre-electoral price regulation. (3) We find increase in the governmental budget deficit, financed by heavy government borrowings from the central bank and banking sector during election year. (4) Real GDP growth and real governmental investment growth declines during pre and post election terms possibly as a result of inefficient resource allocation.

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File URL: http://www.pide.org.pk/pdf/PDR/2012/Volume2/153-166.pdf
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Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 51 (2012)
Issue (Month): 2 ()
Pages: 153-166

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Handle: RePEc:pid:journl:v:51:y:2012:i:2:p:153-166
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  1. Gartner, Manfred, 2000. " Political Macroeconomics: A Survey of Recent Developments," Journal of Economic Surveys, Wiley Blackwell, vol. 14(5), pages 527-561, December.
  2. Alejandro Saporiti & Jorge Streb, 2008. "Separation of powers and political budget cycles," Public Choice, Springer, vol. 137(1), pages 329-345, October.
  3. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
  4. Victor Ginsburgh & Philippe Michel, 1983. "Random timing of elections and the political business cycle," Public Choice, Springer, vol. 40(2), pages 155-164, January.
  5. Hibbs, Douglas A, Jr, 2000. "Bread and Peace Voting in U.S. Presidential Elections," Public Choice, Springer, vol. 104(1-2), pages 149-180, July.
  6. Irem Batool & Gernot Sieg, 2009. "Bread and the attrition of power: Economic events and German election results," Public Choice, Springer, vol. 141(1), pages 151-165, October.
  7. Kevin Grier, 2008. "US presidential elections and real GDP growth, 1961–2004," Public Choice, Springer, vol. 135(3), pages 337-352, June.
  8. Gernot Sieg, 2006. "A Model Of An Opportunistic-Partisan Political Business Cycle," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 242-252, 05.
  9. MacRae, C Duncan, 1977. "A Political Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 239-263, April.
  10. Blomberg, S. Brock & Hess, Gregory D., 2003. "Is the political business cycle for real?," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1091-1121, May.
  11. Cerda, Rodrigo & Vergara, Rodrigo, 2008. "Government Subsidies and Presidential Election Outcomes: Evidence for a Developing Country," World Development, Elsevier, vol. 36(11), pages 2470-2488, November.
  12. Henry W. Chappell & Thomas M. Havrilesky & Rob Roy McGregor, 1993. "Partisan Monetary Policies: Presidential Influence Through the Power of Appointment," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 185-218.
  13. Burton Abrams & Plamen Iossifov, 2006. "Does the Fed Contribute to a Political Business Cycle?," Public Choice, Springer, vol. 129(3), pages 249-262, December.
  14. Woolley, John T., 1994. "The Politics of Monetary Policy: A Critical Review," Journal of Public Policy, Cambridge University Press, vol. 14(01), pages 57-85, January.
  15. Sieg, Gernot, 1997. "A model of partisan central banks and opportunistic political business cycles," European Journal of Political Economy, Elsevier, vol. 13(3), pages 503-516, September.
  16. Andrikopoulos, Andreas & Loizides, Ioannis & Prodromidis, Kyprianos, 2004. "Fiscal policy and political business cycles in the EU," European Journal of Political Economy, Elsevier, vol. 20(1), pages 125-152, March.
  17. Schuknecht, Ludger, 1996. "Political Business Cycles and Fiscal Policies in Developing Countries," Kyklos, Wiley Blackwell, vol. 49(2), pages 155-170.
  18. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
  19. Berger, Helge & Woitek, Ulrich, 2001. "The German political business cycle: money demand rather than monetary policy," European Journal of Political Economy, Elsevier, vol. 17(3), pages 609-631, September.
  20. Caleiro, António, 2009. "How upside down are political business cycles when there is output persistence," Research in Economics, Elsevier, vol. 63(1), pages 22-26, March.
  21. Coelho, Cesar & Veiga, Francisco Jose & Veiga, Linda G., 2006. "Political business cycles in local employment: Evidence from Portugal," Economics Letters, Elsevier, vol. 93(1), pages 82-87, October.
  22. John Maloney & Andrew C. Pickering & Kaddour Hadri, 2003. "Political Business Cycles and Central Bank Independence," Economic Journal, Royal Economic Society, vol. 113(486), pages 167-181, March.
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