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Creative Accounting and Electoral Motives: Evidence from OECD Countries

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  • Markus Reischmann

Abstract

Using an unbalanced panel of 27 OECD countries over the period 1970–2011, I examine whether electoral motives influenced creative accounting. Governments engage in “below-the-line” operations, such as transactions in financial assets, that do not show up in the deficit figures but give rise to changes in debt. I use the difference between the change in public debt and the deficit (stock-flow adjustment) to measure creative accounting. The results suggest that governments strategically engaged in creative accounting before regular elections so as to sugarcoat the budget balance. I also provide an overview of government interventions that gave rise to large stock-flow adjustments.

Suggested Citation

  • Markus Reischmann, 2015. "Creative Accounting and Electoral Motives: Evidence from OECD Countries," ifo Working Paper Series 201, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_201
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    Cited by:

    1. Dominik Hecker & Dano Meiske & Niklas Potrafke & Marina Riem & Christoph Schinke, 2016. "Schuldenbremsen in den deutschen Bundesländern: Worte und Taten der Landesregierungen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(02), pages 14-22, January.
    2. Björn Kauder & Manuela Krause & Niklas Potrafke, 2016. "Electoral Cycles in MPs' Salaries: Evidence from the German States," CESifo Working Paper Series 6028, CESifo Group Munich.
    3. Christopher Gandrud & Mark Hallerberg, 2015. "What is a Financial Crisis? Efficiently Measuring Real-Time Perceptions of Financial Market Stress with an Application to Financial Crisis Budget Cycles," CESifo Working Paper Series 5632, CESifo Group Munich.
    4. Marina Riem, 2016. "Corporate investment decisions under political uncertainty," ifo Working Paper Series 221, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Marina Riem, 2016. "Does political uncertainty influence firm owners‘ business perceptions?," ifo Working Paper Series 226, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    6. Potrafke, Niklas, 2017. "Partisan politics: The empirical evidence from OECD panel studies," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 712-750.
    7. Niklas Potrafke & Marina Riem & Christoph Schinke, 2016. "Debt Brakes in the German States: Governments’ Rhetoric and Actions," German Economic Review, Verein für Socialpolitik, vol. 17(2), pages 253-275, May.
    8. Jäger, Kai, 2016. "The Role of Regime Type in the Political Economy of Foreign Reserve Accumulation," European Journal of Political Economy, Elsevier, vol. 44(C), pages 79-96.
    9. repec:eee:regeco:v:64:y:2017:i:c:p:1-11 is not listed on IDEAS

    More about this item

    Keywords

    Stock-flow adjustments; creative accounting; public debt; political business cycles.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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