Political budget cycles in Latin America
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Date
2022
Journal Title
Journal ISSN
Volume Title
Publisher
PUCE - Quito
Abstract
This paper examines the relationship between elections and fiscal policy in Latin America, 2000-2020. We find evidence of a deterioration of the fiscal balance and an increase in government expenditure in election years, confirming the existence of political budget cycles. Our GMM estimation suggests that government global fiscal deficit increases by 0.6% of GDP, government primary fiscal deficit by 0.8% of GDP, and government expenditure increases by 0.65% of GDP in election years. Additionally, these political budget cycles are significantly larger in countries with more corruption than those with lower corruption, based on the Corruption Perceptions Index published by Transparency International. The difference might be explained by institutional factors; in this case, in countries with higher corruption there are greater possible rents for politicians, so there is a bigger incentive to manipulate the fiscal tools before elections to maintain power.
Description
Keywords
Política fiscal, Elecciones, Corrupción, Política económica