The Destabilizing Effects of Political Budget Cycles: The Case of Greece

George Petrakos (), Konstantinos Rontos (), Chara Vavoura () and Ioannis Vavouras ()
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George Petrakos: Panteion University of Social and Political Sciences
Konstantinos Rontos: University of the Aegean
Chara Vavoura: University of Athens
Ioannis Vavouras: Panteion University of Social and Political Sciences

Chapter Chapter 10 in Advances in Quantitative Economic Research, 2022, pp 129-141 from Springer

Abstract: Abstract During the Third Hellenic Republic (Metapolitefsi), that is over the last four decades, Greece has been characterized by severe political fiscal cycles. Regardless of how we measure political fiscal cycles, via the actual budget balance as percent of GDP or via the primary budget balance as percent of GDP, we consistently observe that, in the years of general (parliamentary) elections, the budget deficit jumps to rates unprecedented for a developed economy. This phenomenon has contributed significantly to the recent Greek public debt crisis. In this paper, we have two main objectives. Firstly, we aim to confirm the emergence of political fiscal cycles in Greece during the period known as the Third Hellenic Republic (Metapolitefsi) beginning at 1974. Secondly, we investigate whether general elections affect not only public finances, but also the total output of the economy and try to characterize this effect as stabilizing or destabilizing. Two are the main findings of our analysis: the Greek economy is indeed characterized by very sharp political fiscal cycles during the period of the Third Hellenic Republic and that these cycles have a destabilizing effect on the total output of the economy.

Keywords: Political budget cycles; Electoral fiscal cycles; Budget balance; Economic growth; Greek economy; Economic destabilization (search for similar items in EconPapers)
JEL-codes: D72 E62 H62 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-98179-2_10

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DOI: 10.1007/978-3-030-98179-2_10

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