Using Real-Time Data to Test for Political Budget Cycles

24 Pages Posted: 27 Sep 2012

See all articles by Richard Jong-A-Pin

Richard Jong-A-Pin

University of Groningen - Department of Economics (Economie)

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: September 26, 2012

Abstract

We use real‐time annual data on the fiscal balance, government current spending, current revenues and net capital outlays as published at a half yearly frequency in the OECD Economic Outlook for 25 OECD countries. For each fiscal year t we have a number of forecasts, a first release, and subsequent revisions. It turns out that revisions in the fiscal balance data are not affected by elections. However, we do find that governments spend more than reported before an election which provides support for moral-hazard type of political budget cycle (PBC) models: through hidden efforts the incumbent tries to enhance his perceived competence. We also find that governments had higher current receipts than reported before an election, which is in line with adverse‐selection type of PBC models in which incumbents signal competence through expansionary fiscal policy before the elections.

Keywords: real-time data, political budget cycles, OECD

JEL Classification: D720, E620, H600, H830, P160

Suggested Citation

Jong-A-Pin, Richard and Sturm, Jan-Egbert and de Haan, Jakob, Using Real-Time Data to Test for Political Budget Cycles (September 26, 2012). CESifo Working Paper Series No. 3939. Available at SSRN: https://ssrn.com/abstract=2152268

Richard Jong-A-Pin

University of Groningen - Department of Economics (Economie) ( email )

P.O. Box 800
9700 AV Groningen
Netherlands

Jan-Egbert Sturm (Contact Author)

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

Jakob de Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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