Government Expenditure and Political Business Cycle

Chong-Bum An and Seoghoon Kang
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Chong-Bum An: Sungkyunkwan University
Seoghoon Kang: Sungshin Women's University

Korean Economic Review, 2000, vol. 16, 193-206

Abstract: We attempt to observe the existence of political business cycle by finding empirical evidence of the eflects of elections on government spendings, employing the Korean data. Using annual data from I970-1998 and dummy variables denoting election year or election lags, we employ the two stage estimation method. The estimated coeflicients of dummy variable indicating the year of election are all positive in all speciï¬ cations and in some cases statistically significant. The estimated coeflicients of other dummy variables indicating the lag to the election are all negative. And the absolute value of negatively estimated coeflicients are larger as the election lag becomes longer. These facts all together strongly suggest the existence of negative relationship between election lag and government expenditure, which verifies the existence of the political business cycle.

Keywords: Government Expenditure; Political Business Cycle; Two Stage Estimation (search for similar items in EconPapers)
JEL-codes: H50 H61 (search for similar items in EconPapers)
Date: 2000
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