Has the Stability and Growth Pact Impeded Political Budget Cycles in the European Union?

Mark Mink, Jakob de Haan and Jakob de Haan
Authors registered in the RePEc Author Service: Jakob de Haan

No 1532, CESifo Working Paper Series from CESifo

Abstract: This paper examines whether there is a political budget cycle (PBC) in countries in the euro area. Using a multivariate model for the period 1999-2004 and various election indicators we find strong evidence that the Stability and Growth Pact has not restricted fiscal policy makers in the euro area in pursuing expansionary policies before elections. In an election-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)
JEL-codes: D72 D78 E62 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-eec, nep-mac and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1532

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