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Revisiting Political Budget Cycles in Latin America


  • Sebastián Nieto Parra


  • Javier Santiso



In this paper we test the impact of elections on fiscal policy in Latin American economies in comparison to OECD countries over the period 1990-2006. We find that in Latin American countries, the average primary balance declines by an amount close to 0.7 per cent of GDP during an election year, confirming the hypothesis of fiscal deteriorations during the election cycle. Most of this movement is due to the expenditure component and within this it is current (close to 0.8 per cent of GDP) rather than capital expenditure that is most affected. By contrast, in OECD countries, the observed changes in the primary balance and current expenditures during election years are minimal. Our analysis also suggests that re-elections of incumbent candidates in Latin America have a considerable impact on the expenditure side of the fiscal balance. Finally, by comparing the 2005-2006 electoral cycle with respect to prior electoral cycles, we note a slight improvement of fiscal management around elections in the region. We derive policy implications and recommendations from our findings. L’objectif de cet article est de tester l’impact des élections sur la politique budgétaire dans les pays d’Amérique Latine par rapport aux pays de l’OCDE pendant la période 1990-2006. Nos résultats montrent qu’en moyenne le solde primaire diminue de près de 0,7 pourcent du PIB pendant l’année électorale, ce qui confirme l’hypothèse d’une détérioration de la discipline budgétaire pendant le cycle électoral en Amérique Latine. Une grande partie de ce mouvement s’explique par une croissance des dépenses publiques qui trouve son origine dans les dépenses courantes (près de 0,8 pourcent du PIB) plus que dans les dépenses en capital. En revanche, dans les pays de l’OCDE, le solde primaire et les dépenses courantes évoluent peu pendant l’année électorale. Notre analyse suggère également que les réélections des candidats en exercice en Amérique Latine ont un impact considérable sur les dépenses budgétaires. Enfin, la comparaison du cycle électoral de 2005-2006 aux cycles passés fait apparaître une amélioration, bien qu’encore réduite, de la discipline budgétaire de la région en période électorale. Nous analysons les implications politiques de ces résultats et proposons des recommandations.

Suggested Citation

  • Sebastián Nieto Parra & Javier Santiso, 2009. "Revisiting Political Budget Cycles in Latin America," OECD Development Centre Working Papers 281, OECD Publishing.
  • Handle: RePEc:oec:devaaa:281-en

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    References listed on IDEAS

    1. Erik Berglof & Yevgeniya Korniyenko & Alexander Plekhanov & Jeromin Zettelmeyer, 2010. "Understanding the Crisis in Emerging Europe," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(6), pages 985-1008, September.
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    Cited by:

    1. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    2. Patrick Carvalho, 2016. "Banking on Democracy: Financial Markets and Elections in Emerging Countries , by Javier Santiso ( MIT Press , Cambridge, MA , 2013 ), pp. xxxi + 317 ," The Economic Record, The Economic Society of Australia, vol. 92(297), pages 320-322, June.
    3. Antoine CAZALS & Pierre MANDON, 2016. "Political Budget Cycles: Manipulation from Leaders or Manipulation from Researchers? Evidence from a Meta-Regression Analysis," Working Papers 201609, CERDI.
    4. Bassett, Lucy & Giannozzi, Sara & Pop, Lucian & Ringold, Dena, 2012. "Rules, roles, and controls : governance in social protection with an application to social assistance," Social Protection and Labor Policy and Technical Notes 67612, The World Bank.
    5. Antoine Cazals & Pierre Mandon, 2016. "Political Budget Cycles: Manipulation from Leaders or Manipulation from Researchers? Evidence from a Meta-Regression Analysis," Working Papers halshs-01320586, HAL.
    6. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.

    More about this item


    Amérique latine; candidats en exercice; cycle politique et budgétaire; elections; incumbent candidates; Latin America; political budget cycle; élections;

    JEL classification:

    • 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
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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