Election induced fiscal and monetary cycles: evidence from the Caribbean

Abstract

This study examines whether governments in the Caribbean systematically attempt to alter voter preferences through the use of fiscal and monetary policy tools during election periods. It also investigates whether governments reverse their pre-election excesses in the year after a general election. I estimate a variant of the Nordhaus politico-economic model for selected Caribbean countries. The Arellano-Bond dynamic panel estimator is employed to empirically test this model, and the results indicate that there is evidence to suggest that Caribbean governments pursue electorally timed interventions in fiscal and monetary instruments but do not reverse their policies in the aftermath of an election.