Are there political fiscal cycles in NMS?
Faculty of Applied Economics
Antwerp :UA, 2009
Research paper / UA, Faculty of Applied Economics ; 2009:13
University of Antwerp
It is a generally documented fact that political cycles are a phenomenon of new democracies. In this paper we deepen the evidence for the new EU member countries that are a prominent example of recently established democratic systems. We show that, in line with the opportunistic theory, primary balances tended to deteriorate in the years of elections, if taking NMS en bloc. This was mainly driven by the cycle in government expenditures. However, careful cross-country and cross-time analysis challenges the general view. It turns out that the political cycle cannot be attributed to all new European democracies, in particular, not to those that made long-run attempts to integrate into EMU. Moreover, we document that with the time passing, opportunism has evaporated from the overall sample of the NMS. This comes from the fact that the political cycle has diminished in countries that were prone to opportunistic manipulation in the initial period.