Domestic vs. External Economic Sectors and the Political Process: Insights from Greece

George Petrakos, Kostas Rontos, Luca Salvati (), Chara Vavoura and Ioannis Vavouras
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George Petrakos: Department of Public Administration, Panteion University, 136 Syngrou Avenue, EL-17671 Athens, Greece
Kostas Rontos: Department of Sociology, University of the Aegean, University Hill, EL-81100 Mytilene, Greece
Luca Salvati: Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome, Via del Castro Laurenziano 9, I-00161 Rome, Italy
Chara Vavoura: Department of Economics, National and Kapodistrian University of Athens, 1 Sofokleous Str., EL-10559 Athens, Greece
Ioannis Vavouras: Department of Public Administration, Panteion University, 136 Syngrou Avenue, EL-17671 Athens, Greece

Economies, 2022, vol. 10, issue 8, 1-13

Abstract: Building on the well-established relationship between economic dynamics and political processes, we focus on the most important element of the political process, namely, general (or national) elections, and look into their effects on public finance and total economic output. In this vein, the present study has three objectives: (i) to investigate political budget cycles in Greece during the period known as the ‘Third Hellenic Republic’ (in Greek, ‘Metapolitefsi’, hereafter THR) since 1974; (ii) to assess whether national elections affect total economic activity in a stabilizing or destabilizing way; and (iii) to examine the possible effects of the external sector of the economy on the budget balance. The empirical findings of our analysis document how the Greek economy was characterized by sharp political budget cycles in correspondence with the THR, exerting a destabilizing effect on the total output of the economy. Performances of the external sector of the economy have significantly affected budget balances in Greece.

Keywords: political budget cycles; electoral cycles; economic destabilization; international trade (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
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