Political Business Cycles in EU Accession Countries

Mark Hallerberg (), Lucio Vinhas de Souza and William Roberts Clark
Additional contact information
William Roberts Clark: New York University, USA william.clark@nyu.edu

European Union Politics, 2002, vol. 3, issue 2, 231-250

Abstract: This paper considers whether political business cycles existed in East European accession countries during the period 1990-9. Based on the Mundell-Fleming model expanded in Clark and Hallerberg (2000), we argue that the type of exchange rate regime and the relative independence of the central bank affects the instruments governments use to influence the economy before elections. In our empirical analysis, we find that accession countries with dependent central banks and flexible exchange rates have looser monetary policies in electoral periods than in non-electoral periods. If a country has a fixed exchange rate regime, it manipulates its economy in election years through running larger budgets instead of through looser monetary policy. The presence of such cycles in Eastern Europe has implications for the introduction of the euro in EU accession countries.

Keywords: political business cycles; central bank independence; European Union; EU enlargement (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (35)

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Working Paper: The Political Business Cycles of EU Accession Countries (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:eeupol:v:3:y:2002:i:2:p:231-250

DOI: 10.1177/1465116502003002005

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