Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/84497
Authors: 
Streb, Jorge M.
Torrens, Gustavo F.
Year of Publication: 
2009
Series/Report no.: 
Serie Documentos de Trabajo, Universidad del CEMA: Área: economía y ciencia política 395
Abstract: 
Political budget cycles (PBCs) result from the credibility problems that office-motivated incumbents face under asymmetric information, due to their temptation to manipulate fiscal policy to increase their electoral chances. We analyze the role of rules that limit debt, crucial for aggregate PBCs to take place. Since the budget process under separation of powers typically requires that the legislature authorize new debt, divided government can make these fisscal rules credible. Commitment is undermined either by unified government or by imperfect compliance with the budget law. When divided government affects efficiency, voters must trade off electoral distortions and government competence.
Subjects: 
political budget cycles
discretion
unified government
rules
credibility
separation of powers
divided government
Document Type: 
Working Paper

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