engleski

Conditional Political Budget Cycles in the EU – Where Do They Originate From and Do They Pay Off?

Elections test all three functions of public finances, but the most important effect is shown vis-à-vis the stabilization function. Thus, are elections a mechanism by which voters choose responsible politicians, who do not create budget deficits, or do they actually contribute to the incumbents opportunistic behaviour? Employing data for 9 European Union member states over 1995– 2016 period in a dynamic linear and non-linear panel model, this paper addresses these two empirical questions. Estimation results reveal that fiscal decentralisation, government structure and fiscal rules influence on what level do the political budget cycles occur that are recorded at the general government level. Furthermore, election-motivated policies do not have a significant positive effect on the probability of re-election.

political budget cycles ; dynamic linear and non linear panel models ; re-election ; European union

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