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Title:Using real-time data to test for political budget cycles PDF Logo
Authors:Jong-A-Pin, Richard
Sturm, Jan-Egbert
de Haan, Jakob
Issue Date:2012
Series/Report no.:CESifo Working Paper: Public Choice 3939
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.
Subjects:real-time data
political budget cycles
OECD
JEL:D72
E62
H60
H83
P16
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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