Estimating the Effect of Parliamentary Elections on Primary Budget Deficits in OECD Countries

Tobias Hagen ()
Additional contact information
Tobias Hagen: Federal University of Applied Administrative Sciences, Germany

Economics Bulletin, 2007, vol. 8, issue 8, 1-5

Abstract: Using an unbalanced panel of 24 OECD countries for the period 1986-2005 the paper empirically tests the political budget cycle hypothesis. The econometric approach is based on the equation proposed by BOHN (1998) for testing the sustainability of fiscal policy and system GMM estimators. The empirical results strongly support the hypothesis of smaller primary surpluses (only) in election years. The result found by BRENDER and DRAZEN (2005) that an election effect exists only in new democracies is rejected. However, in contrast to the political budget cycle hypothesis, it is argued that the result may rather be explained by governments' attempt to avoid intra-governmental conflicts on limited budgetary funds during election years, since this may be interpreted as an adverse signal by the voters. Besides, the results indicate only a temporary effect of the European Monetary Union.

JEL-codes: E6 H6 (search for similar items in EconPapers)
Date: 2007-08-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2007/Volume8/EB-07H60001A.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-07h60001

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().