Fiscal management and political budget cycles in transition economies: data panel analysis
Abstract
In this paper, on the basis of relevant statistical tests, the influence of the electoral process on the trajectory of fiscal indicators in the transition countries is analyzed. The aim of the research is to identify the political manipulation of certain fiscal policy mechanisms in transition countries.The focus of the survey is on the growth of general government spending, the reduction of general government revenues and the creation of budget deficits as the coherent consequences of fiscal expansion in the pre-election period. By testing, there is no relevant evidence of the use of tax incentives as a form of political action on the economic sphere. On the other hand, the results of the survey indicate that in the observed countries, there really is a rise in government spending in the period before the election process and, consequently, the growth of budget deficits. However, according to the same findings, in the post-election period there is no reduction in consumption. Growth in general governments consumption continues, but to a lesser degree, which in turn leads to the correction of the budgetary balance.
References
Akhmedov, A., & Zhuravskaya, E. (2004). Opportunistic Political Cycles: Test in a Young Democracy Setting. The Quarterly Journal of Economics, 119 (4), 1301–1338.
Alesina, A., Campante, F.R., & Tabellini, G. (2008). Why is fiscal policy often procyclical? Journal of the European Economic Association, 6 (5), 1006–1036.
Andrikopoulos, A., Loizides, I., & Prodromidis, K. (2004). Fiscal policy and political business cycles in the EU. European Journal of Political Economy, 20 (1), 125-152.
Boyar, A. (2015). Intra-governmental bargaining and political budget cycles in the European Union. European Union Politics, SAGE Publications, 16 (1), 90-115.
Brender, A. (2003). The effect of fiscal performance on local government election results in Israel: 1989–1998. Journal of Public Economics, 89 (9-10), 2187-2205.
Brender, A., & Drazen, A. (2005). Political budget cycles in new versus established democracies. Journal of Monetary Economics, 52 (7), 1271-1295.
Brender, A., & Drazen, A. (2008). How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Panel of Countries. American Economic Review, 98 (5), 2203-2220.
Brender, A., & Drazen, A. (2013). Elections, leaders, and the composition of government spending. Journal of Public Economics, 97 (2013), 18-31.
De Haan, J., & Klomp, J. (2013). Conditional political budget cycles: a review of recent evidence. Public Choice, 157 (3-4), 387–410.
Doležalová, J. (2013). Political cycle and fiscal policy in the countries of the European Union. Economická Revue, 16 (2013), 93-108.
Donahue, K., & Warin, T. (2007). The Stability and Growth Pact: A European Answer to the Political Budget Cycle? Comparative European Politics, 5 (4), 423-440.
Drazen, A., & Eslava, M. (2010). Electoral manipulation via voter-friendly spending: Theory and evidence. Journal of Development Economics, 92 (1), 39-52.
Efthyvoulou, G. (2012). Political budget cycles in the European Union and the impact of political pressures. Public Choice, 153 (3-4), 295–327.
Electoral System Design Database. (2019, February 23). Retrieved from International Institute for Democracy and Electoral Assistance: https://www.idea.int/data-tools/data/electoral-system-design
Fatás, A., & Mihov, I. (2003). On constraining fiscal policy discretion in EMU. Oxford, 19 (1), 112-131.
Garmann, S. (2017). Political budget cycles and fiscally conservative voters. Economics Letters, 155 (2017), 72-75.
Golinelli, R., & Momigliano, S. (2006). Real-time determinants of fiscal policies in the euro area: Fiscal rules, cyclical conditions and elections. Temi di discussione (Economic working papers) No. 609.
Health Nutrition and Population Statistics. (2019, February 22). Retrieved from The World Bank: https://databank.worldbank.org/data/source/health-nutrition-and-population-statistics
Hilal, Y., & Yildirim, D. Ҫ. (2014). An Empirical Study of Fiscal Sustainability in Eurozone. Serbian Journal of Management, 9 (1), 59-70.
Index of Economic Freedom. (2019, February 23). Retrieved from Heritage Foundation:
https://www.heritage.org/index/explore
Jakšić, M., & Praščević, A. (2011). Political macroeconomics. Belgrade, RS: Center for Publishing of the Faculty of Economics. (In Serbian)
Klašnja, M. (2008). Electoral Rules, Forms of Government, and Political Budget Cycles in Transition Countries. Panoeconomicus, 55 (2), 185-218.
Klomp, J., & De Haan, J. (2013). Political budget cycles and election outcomes. Public Choice, 157 (1-2), 245–267.
Mačkić, V. (2014). Political budget cycles at the municipal level in Croatia. Financial Theory and Practice, 38 (1), 1-35.
Mink, M., & De Haan, J. (2006). Are there Political Budget Cycles in the Euro Area? European Union Politics, SAGE Publications, 7(2), pp. 191-211.
Persson, T., & Tabellini, G. (2003). The economic effects of constitutions: what do the data say? Cambridge, UK: MIT Press.
Piatek, D. (2016). Institutions and economic growth in transition countries - new experiences and implications from financial crisis 2007-2010. Ekonomia i Prawo, 15 (4), 515-526.
Praščević, A. (2013). Dometi ekonomske politike u prevazilaženju efekata globalne ekonomske krize na ekonomiju Srbije. Ekonomski horizonti, 15 (1), 17-30.
Rose, S. (2006). Do fiscal rules dampen the political business cycle? Public Choice, 128 (3-4), 407–431. Schuknecht, L. (1996). Political Business Cycles and Fiscal Policies in Developing Countries. Kyklos, 49 (2), 155-170.
Shi, M., & Svensson, J. (2003). Political Budget Cycles: A Review of Recent Developments. Nordic Journal of Political Economy, 29 (1), 67-76.
Shi, M., & Svensson, J. (2006). Political budget cycles: Do they differ across countries and why? Journal of Public Economics, 90 (8-9), 1367-1389.
Streb, J. M., Lema, D., & Torrens , G. (2005). Discretional political budget cycles and separation of. Serie Documentos de Trabajo, No. 286.
World Development Indicators. (2019, February 20). Retrieved from The World Bank: https://databank.worldbank.org/data/source/world-development-indicators
World Economic Outlook. (2019, February 20). Retrieved from International Monetary Fund: https://www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx
The Author wishes to submit the Work to SJM for publication. To enable SJM to publish the Work and to give effect to the parties’ intention set forth herein, they have agreed to cede the first right to publication and republication in the SJM Journal.
Cession
The Author hereby cedes to SJM, who accepts the cession, to the copyright in and to the paper.
The purpose of the cession is to enable SJM to publish the Work, as first publisher world-wide, and for republication in the SJM Journal, and to grant the right to others to publish the Work world-wide, for so long as such copyright subsists;
SJM shall be entitled to edit the work before publication, as it deems fit, subject to the Authors approval
The Author warrants to SJM that:
- the Author is the owner of the copyright in the Work, whether as author or as reassigned from the Author’s employee and that the Author is entitled to cede the copyright to SJM;
- the paper (or any of its part) is not submitted or accepted for publication in any other Journal;
- the Work is an original work created by the Author;
- the Author has not transferred, ceded, or assigned the copyright, or any part thereof, to any third party; or granted any third party a licence or other right to the copyright, which may affect or detract from the rights granted to SJM in terms of this agreement.
The Author hereby indemnifies the SJM as a body and its individual members, to the fullest extent permitted in law, against all or any claims which may arise consequent to the warranties set forth.
No monetary consideration shall be payable by SJM to the Author for the cession, but SJM shall clearly identify the Author as having produced the Work and ensure that due recognition is given to the Author in any publication of the Work.
Should SJM, in its sole discretion, elect not to publish the Work within 1 year after the date of this agreement, the cession shall lapse and be of no further effect. In such event the copyright shall revert to the Author and SJM shall not publish the Work, or any part thereof, without the Author’s prior written consent.