Abstract
Public expenditure subjects to government and its volume and structure is influenced by decisions of government according to activities and fiscal policies realized. Political expenditure cycles could also act as one of potential public expenditure determinant and could influence the public expenditure volume and structure. The paper examines whether the political expenditure cycle is present in V4 countries at the central level of government considering the opportunistic approach. Variance of central government expenditure indicates the presence of changes in the central government total expenditure and in its sub-categories defined according to government functions, while the analysis of their dynamics in connection with parliamentary election brings only vague results. After, the OLS model is estimated for each V4 country for the period 1995-2015. Results of estimations present certain statistically significant impact of election period on the central government total expenditure. As the monitored time-series cover the period of the financial crisis, models were tested for the structural break. Augmented regressions were re-estimated. Results point to cases, when election variables meet the hypothesis about the opportunistic behaviour of central government. Additionally, prevalent part of results shows opposite behaviour of the central government before and after the financial crisis. However, observed results do not allow generalizing the opportunistic model to all V4 post-communist countries, because statistically significant opposite effects of tested hypothesis are also observed.
Highlights
Revising the political cycle literature, authors distinguish among opportunistic and partisan approach introduced to the economy in the 1970s
Variance of central government expenditure indicates the presence of changes in the central government total expenditure and in its sub-categories defined according to government functions, while the analysis of their dynamics in connection with parliamentary election brings only vague results
The volume of central government total expenditure reached its maximum in 2000 (38.4% of GDP), when certain reforming steps in the public sector and public finance were prepared by the central government
Summary
Revising the political cycle literature, authors distinguish among opportunistic and partisan approach (see, e.g. Alesina and Roubini, 1990) introduced to the economy in the 1970s. Revising the political cycle literature, authors distinguish among opportunistic and partisan approach Alesina and Roubini, 1990) introduced to the economy in the 1970s. Opportunistic behaviour of political incumbent is explained by the interest in re-election, which motivate it to change the volume and structure of public expenditure in election years (Delgado et al 2011). As Alesina and Roubini (1990, p.1) mention, “... Opportunistic government activities in the period of election might be connected with two types of political cycle. In the case of political budget cycle, the political incumbent is engaged into the manipulation with the volume of public expenditure and provides the expansionary fiscal policy, or, if the voter is conservative, the incumbent changes the structure of the public expenditure in favour of visible and citizen friendly areas as housing or social services (Drazen and Eslava, 2010)
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