Efthyvoulou, Georgios (2010) Political budget cycles in the European Union and the impact of political pressures: a dynamic panel regression analysis. Working Paper. Birkbeck College, University of London, London, UK.
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Abstract
This paper investigates the presence of political budget cycles (PBCs) in the European Union using a data set encompassing all 27 current member states over the period 1997-2008, and analyzes what may explain their variability across countries and over time. Conditioning on partisan considerations and several socio-economic variables, we find evidence in favor of a systematic electoral cycle in fiscal policy (i.e. spending and budget deficits are raised in election years). Furthermore, we find that PBCs are much larger in the Eurozone countries than in the countries that have not yet adopted the euro. Finally, we discuss an interesting area for future research, namely, fiscal policy manipulations are influenced by the information available to the market before elections. Specifically, we show that the size of PBCs is inversely proportional to the relative weight voters assign to non-economic issues prior to an election and positively correlated with the uncertainty over the electoral outcome. Once we account for these two features, the aforementioned differences between the Eurozone and the non-Eurozone countries seem to disappear.
Metadata
| Item Type: | Monograph (Working Paper) |
|---|---|
| Keyword(s) / Subject(s): | political budget cycles, fiscal policy, elections, opinion polls, European Union |
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Administrator |
| Date Deposited: | 24 Jun 2013 11:00 |
| Last Modified: | 02 Aug 2023 17:05 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/7553 |
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