Are there Political Budget Cycles in the Euro Area?

Mark Mink and Jakob de Haan

European Union Politics, 2006, vol. 7, issue 2, 191-211

Abstract: This article examines whether there is a political budget cycle (PBC) in countries in the euro area. Using a multivari ate model for 1999–2004 and various election indicators we find strong evidence that, since the start of the Stability and Growth Pact, fiscal policy-makers in the euro area have pursued expansionary policies before elections. In an elec tion year – but not in the year prior to the election – the budget deficit increases. This result is in line with third-generation PBC models, which are based on moral hazard. We also find a significant but small partisan effect on fiscal policy outcomes.

Keywords: fiscal policy; political budget cycle; Stability and Growth Pact (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (80)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:eeupol:v:7:y:2006:i:2:p:191-211

DOI: 10.1177/1465116506063706

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