Are there Political Budget Cycles in the Euro Area?
This article examines whether there is a political budget cycle (PBC) in countries in the euro area. Using a multivari ate model for 1999â€“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 â€“ but not in the year prior to the election â€“ 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.
Volume (Year): 7 (2006)
Issue (Month): 2 (June)
|Contact details of provider:|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tujula, Mika & Wolswijk, Guido, 2004. "What determines fiscal balances? An empirical investigation in determinants of changes in OECD budget balances," Working Paper Series 0422, European Central Bank.
- Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
- Volkerink, Bjorn & De Haan, Jakob, 2001. " Fragmented Government Effects on Fiscal Policy: New Evidence," Public Choice, Springer, vol. 109(3-4), pages 221-42, December.
- Kenneth Rogoff, 1987.
"Equilibrium Political Budget Cycles,"
NBER Working Papers
2428, National Bureau of Economic Research, Inc.
- Rogoff, Kenneth & Sibert, Anne, 1988.
"Elections and Macroeconomic Policy Cycles,"
Review of Economic Studies,
Wiley Blackwell, vol. 55(1), pages 1-16, January.
- Jakob de Haan & Helge Berger & David-Jan Jansen, 2004. "Why has the Stability and Growth Pact Failed?," International Finance, Wiley Blackwell, vol. 7(2), pages 235-260, 07.
- Marco Buti & Paul van den Noord, 2003. "Discretionary Fiscal Policy and Elections: The Experience of the Early Years of EMU," OECD Economics Department Working Papers 351, OECD Publishing.
- Jakob de Haan & Helge Berger & David-Jan Jansen, 2003.
"The End of the Stability and Growth Pact?,"
CESifo Working Paper Series
1093, CESifo Group Munich.
- Shi, Min & Svensson, Jakob, 2002. "Conditional Political Budget Cycles," CEPR Discussion Papers 3352, C.E.P.R. Discussion Papers.
- Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
- L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
- Schuknecht, Ludger, 2004. "EU fiscal rules: issues and lessons from political economy," Working Paper Series 0421, European Central Bank.
- Perotti, Roberto & Kontopoulos, Yianos, 2002. "Fragmented fiscal policy," Journal of Public Economics, Elsevier, vol. 86(2), pages 191-222, November.
- 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.
- James E. Alt & David Dreyer Lassen, 2005. "The Political Budget Cycle is Where You Can't See It: Transparency and Fiscal Manipulation," EPRU Working Paper Series 05-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:sae:eeupol:v:7:y:2006:i:2:p:191-211. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications)
If references are entirely missing, you can add them using this form.