Abstract
This article analyses political business cycles (PBCs) in ten former European communist countries. The dataset used covers the period 1990‐2018. The results show that the PBCs manifest themselves in these countries through both fiscal and monetary policy. Changes in government expenditure during election times are found to be significant in reducing unemployment. Hence, it signals that there is a politically driven fiscal expansion. The results also show the importance of institutional quality in reducing the effects of the PBCs. The monetary policy models indicate that changes in money stock during and around election times affect the unemployment rate. Undertaking a subsample analysis of the non‐EU and EU members highlights the case that the membership of the EU is an important factor in preventing the development of PBCs.Related ArticlesHazakis, Konstantinos J. 2015. “The Political Economy of Economic Adjustment Programs in the Eurozone: A Detailed Policy Analysis.” Politics & Policy 43 (6): 822‐854. https://doi.org/10.1111/polp.12141Rogers, Chris. 2009. “The Politics of Economic Policy Making in Britain: A Re‐Assessment of the 1976 IMF Crisis.” Politics & Policy 37 (5): 971‐994. https://doi.org/10.1111/j.1747‐1346.2009.00207.xSager, Fritz, and Markus Hinterleitner. 2016. “How do Credit Rating Agencies Rate? An Implementation Perspective on the Assessment of Austerity Programs during the European Debt Crisis.” Politics & Policy 44 (4): 783‐815. https://doi.org/10.1111/polp.12165
Highlights
This article analyses political business cycles (PBCs) in ten former European communist countries
Telatar (2003) shows that PBCs do exist even in countries with strong institutions. This is supported by Abrams and Iossifov (2006), who argue that the U.S Federal Reserve Bank plays a role in the development of PBCs, but only during the periods under which the incumbent politicians are the ones that have appointed the Fed Chair
This article investigates the existence of the PBCs in the newly democratized former European socialist countries
Summary
This article analyses political business cycles (PBCs) in ten former European communist countries. The results show that the PBCs manifest themselves in these countries through both fiscal and monetary policy. Changes in government expenditure during election times are found to be significant in reducing unemployment. It signals that there is a politically driven fiscal expansion. The results show the importance of institutional quality in reducing the effects of the PBCs. The monetary policy models indicate that changes in money stock during and around election times affect the unemployment rate. “The Political Economy of Economic Adjustment Programs in the Eurozone: A Detailed Policy Analysis.”. “The Politics of Economic Policy Making in Britain: A Re-Assessment of the 1976 IMF Crisis.”.
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