NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Political Budget Cycles in New versus Established Democracies

Adi Brender, Allan Drazen

NBER Working Paper No. 10539
Issued in June 2004
NBER Program(s):   EFG   IFM

Like other recent studies, we find the existence of a political deficit cycle in a large cross-section of countries. However, we find that this result is driven by the experience of new democracies'. The strong budget cycle in those countries accounts for the finding of a budget cycle in larger samples that include these countries; when these countries are removed from the larger sample, so that only established' democracies remain, the political budget cycle disappears. The political deficit cycle in new democracies accounts for findings in both developed and less developed economies, for the finding that the cycle is stronger in weaker democracies, and for differences in the political cycle across governmental and electoral systems. Our findings may reconcile two contradictory views of pre-electoral manipulation, one arguing it is a useful instrument to gain voter support and a widespread empirical phenomenon, the other arguing that voters punish rather than reward fiscal manipulation.

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Document Object Identifier (DOI): 10.3386/w10539

Published: Brender, Adi and Allan Drazen. "Political Budget Cycles In New Versus Established Democracies," Journal of Monetary Economics, 2005, v52(7,Oct), 1271-1295.

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