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Are there Political Budget Cycles in the Euro Area?
[journal article]
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 pu... view more
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 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.... view less
Classification
Economic Policy
Public Finance
Free Keywords
fiscal policy; political budget cycle; Stability and Growth Pact;
Document language
English
Publication Year
2006
Page/Pages
p. 191-211
Journal
European Union Politics, 7 (2006) 2
DOI
https://doi.org/10.1177/1465116506063706
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)