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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)

  • Srđan Redžepagić

    ()

    (Institute of Economic Sciences, Belgrade, Serbia; University of Nice Sophia-Antipolis, CEMAFI, France)

  • Matthieu Llorca

    ()

    (University of Burgundy, LEG/CEMF, France)

Registered author(s):

    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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    File URL: http://www.panoeconomicus.rs/casopis/osmibroj/does%20politics%20matter%20in%20the%20conduct%20of%20fiscal%20policy.pdf
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    Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

    Volume (Year): 54 (2007)
    Issue (Month): 4 (December)
    Pages: 489-500

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    Handle: RePEc:voj:journl:v:54:y:2007:i:4:p:489-500
    Contact details of provider: Web page: http://www.panoeconomicus.rs/

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    10. Berger, Helge & Kopits, George & Székely, István P., 2006. "Fiscal indulgence in Central Europe: loss of the external anchor?," Discussion Papers 2006/9, Free University Berlin, School of Business & Economics.
    11. Hamilton, James D & Flavin, Marjorie A, 1986. "On the Limitations of Government Borrowing: A Framework for EmpiricalTesting," American Economic Review, American Economic Association, vol. 76(4), pages 808-19, September.
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    13. László Csontos & János Kornai & István György Tóth, 1998. "Tax awareness and reform of the welfare state: Hungarian survey results," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(2), pages 287-312, November.
    14. Neck, Reinhard & Getzner, Michael, 2001. "Politico-Economic Determinants of Public Debt Growth: A Case Study for Austria," Public Choice, Springer, vol. 109(3-4), pages 243-68, December.
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