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Are there Political Budget Cycles in the Euro Area?

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  • Mark Mink

    (University of Groningen, The Netherlands)

  • Jakob de Haan

    (University of Groningen, The Netherlands, and CESifo, Munich, Germany)

Abstract

This article examines whether there is a political budget cycle (PBC) in countries in the euro area. Using a multivari ate model for 1999–2004 and various election indicators we find strong evidence that, since the start of the Stability and Growth Pact, fiscal policy-makers in the euro area have pursued expansionary policies before elections. In an elec tion year – but not in the year prior to the election – the budget deficit increases. This result is in line with third-generation PBC models, which are based on moral hazard. We also find a significant but small partisan effect on fiscal policy outcomes.

Suggested Citation

  • Mark Mink & Jakob de Haan, 2006. "Are there Political Budget Cycles in the Euro Area?," European Union Politics, , vol. 7(2), pages 191-211, June.
  • Handle: RePEc:sae:eeupol:v:7:y:2006:i:2:p:191-211
    DOI: 10.1177/1465116506063706
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    References listed on IDEAS

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