Taylor’s rule, political cycle, and Latin America—An analysis of time series in search of responsibility for monetary stabilization

The decades before 1990 were dramatic for Latin American economies. However, from 1990 onwards, a set of policies followed by the various states in the region acheived economic stabilization with real income recovery. The attribution of this success has been disputed by politicians, economists and officials from international economic support institutions. This work will analyze the responsibility for this success in 4 economies in the region (Brazil, Colombia, Mexico and Peru). Through the combined analysis of ARDL, Markov states and structural breaks, we highlight different sources of responsibility in different periods. Additionally, detailing the states of each regime, we verify the duration of the regimes related to inflation rates and to interest rates in the region. We identify specific governments as associated with moments of economic stabilization in the region, so the hypothesis of the political cycle cannot be rejected for the set of results achieved. As policy implication, we claim that Taylor rules are endogenous to Political Budget Cycles and so stabilization plans are restricted to political tenures.

Political Budget Cycles in Public Revenues: Evidence From Fines

This article seeks to ascertain whether local governments make improper use of their discretion and use pecuniary sanctions for electoral purposes. To this end, a sample of Spanish municipalities with a population of more than 1,000 citizens during the period 2010 to 2016 has been used. Our results show that revenues from fines are influenced by the presence of elections. In particular, we find that local governments in an election year reduce the percentage of fines, measured either over total non-financial revenues or in per capita terms. This reduction, compared to the pre-election year, suggests that politicians use their discretionary power to issue fewer fines in election years, as they are aware that penalties are not well-regarded by citizens. In addition, we find that the most indebted municipalities, those governed by right-wing parties and the most fragmented municipalities tend to collect more revenues from fines in the pre-election year. Finally, other factors influencing revenues from fines are the number of inhabitants of the municipality, the sources of external funding that the local government has, the ideology of the rulers and their political strength.

Planning Consistency and the Political Budget Cycle in Indonesia

This study aims to find empirical evidence of the relationship between planning and the practices associated with political budget cycles in Indonesia, with reference to the simultaneous regional head elections held in 2017 and 2018. A fixed-effect method using least-square dummy variables analyzes the role of planning in the relationship between local-government spending and political budget cycle behaviors. The results indicate that consistency between planning and budgeting can control the discretion applied by regional heads to increase and decrease budget expenditure in the two years before an election, one year before an election and in the election year itself. The magnitude of these reductions or increases differs between types of expenditure. The association between planning and the political budget cycle is significant in the two years before an election for primary expenditure allocations and in a year before an election for allocations of capital expenditure, social assistance, and grants and subsidies.

Public Expenditure Management and Political Budget Cycles: The Case of Colima City Council 2009-2018

The political budget cycles (PBC), as an evolutionary part of the economic political cycle (EPC), demonstrate the existence of opportunistic practices of economic variables, electoral, and budgetary that the politicians in power operate in their management to continue in office. In this sense, the literature suggests a pattern of opportunistic behavior on voters’ myopia, showing that there is little retrospective memory for voters, allowing the party in power to execute public policies successfully. Thus, the objective of the research is to analyze the existence of political budgetary cycles in the management of investment spending by the City of Colima from the years 2009 to 2018. Thus, the objective of the research is to analyze the existence of political budgetary cycles in the management of investment spending by the City of Colima from the years 2009 to 2018. This was analyzed using the panel data methodology (MCO; EF; EA), to estimate the variables dependent on investment and current expenditure, a dummy variable was introduced to identify the year before the election and to be able to control the influence of the electoral period on each regression. The results show that investment spending is related to election periods, population growth, and the federal social aid budget sector. Current expenditure was only related to population growth. This allows us to explain that spending is a resource that finances public works in the states of Mexico. Thus, this research shows that public works is a public expenditure that the states of Mexico apply more in times of elections.

Mayors, Using Cultural Expenditure in An Opportunistic Way Improves the Chances of Re-Election, but Do Not Do It: Revisiting Political Budget Cycles

This article analyzes whether expenditure on the provision of merit goods, culture, health, education, and sports, by local governments, in medium-sized cities (between 20,000 and 100,000 inhabitants) is tied to the electoral cycle; that is, whether expenditure increases in the run up to an electoral process. Further, we analyze whether the increase in spending on Culture by local governments has any significant effect on the probability of local governments being re-elected. To answer these questions, a database of 350 medium-sized municipalities is used comprising the period 2011 to 2019, when two municipal elections were held in Spain; in 2015 and in 2019. The results confirm that both total spending and spending on culture and sports, are tied to the electoral cycle, while expenditure on other merit goods is not. Moreover, using a logit model, it is confirmed that an increase in culture expenditure has a significant effect on the probability of the government being re-elected. Specifically, a one-third increase in cultural expenditure, as a proportion of total expenditure (e.g., passing from 6% to 8%) at local government level, improves re-election chances by almost 10%.