A new view into political business cycles: Household behaviour in Albania

Endrit Lami (), Holger Kächelein () and Drini Imami
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Endrit Lami: Budapest University of Technology and Economics (BME), Budapest, Hungary
Holger Kächelein: Bavarian Virtual University (Virtuelle Hochschule Bayern - VHB), Bamberg, Germany

Acta Oeconomica, 2014, vol. 64, issue supplement1, 201-224

Abstract: Over the last decades, there has been plenty of research and publications on Political Business Cycles (PBC), aimed at analysing and explaining the use of fiscal and monetary instruments to stimulate economic growth before elections, with the intention of impressing potential voters. Previous research on PBC in Albania reveals clear evidence of fiscal expansion before elections, but no significant changes in GDP and inflation as theory predicts. One possible explanation of this result could be economic agents’ expectations, which is the subject of this paper. We analyse consumers’ expectations before elections, the main factors underlying expectations, and the way in which these expectations influence their behaviour toward spending, and consequently the macroeconomic outcomes, deploying standard econometric methods widely applied in PBC related research. According to our research results, households’ consumption spending decreases before elections because of the higher uncertainty about their future economic situation due to the highly politicised public employment.

Keywords: political business cycle; household behaviour; elections; Albania (search for similar items in EconPapers)
JEL-codes: E32 N14 O23 (search for similar items in EconPapers)
Date: 2014
Note: The views expressed herein are solely those of the author and do not reflect the views of the Ministry of Finance in Albania.
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Citations: View citations in EconPapers (8)

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