Temporal Aggregation in Political Budget Cycles

Abstract

While existing cross-country studies on political budget cycles rely on annual data, we build a panel with quarterly and monthly data from Latin American and OECD countries over the 1980-2005 period. Disaggregated data allow to center the electoral year more precisely, and show the effects are concentrated in a three-quarter window around elections. Cycles are statistically significant only in Latin America, but the pattern is similar to OECD countries: the budget surplus/GDP ratio falls in the election period and rises in the post-election period. In line with the logic of rational opportunistic manipulation, these effects cancel out.

Keywords: temporal aggregation, electoral window, pre- and post-electoral effects, political budget cycles, rational opportunistic cycles

JEL Classification: D72, D78, H60