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Voters’ Awareness as a Determinant of Political Budget Cycles: Evidence from Selected European Economies

Author

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  • Milutin Jesic

    (Department for Economic Theory and Analysis, Faculty of Economics and Business, University of Belgrade, Serbia)

  • Aleksandra Prasceevic

    (Department for Economic Theory and Analysis, Faculty of Economics and Business, University of Belgrade, Serbia)

Abstract

This paper analyzes the presence of political budget cycles (PBC) in connection with the different levels of voter awareness in selected European countries. The characteristics of voters and their awareness of the real motives of incumbent politicians in conducting fiscal policy are of particular importance in PBC models. This study uses system GMM to estimate the dynamic panel data models that capture the behavior of structural budget balances. The models are estimated based on balanced panel data for 15 post-transition and low- and middle-income European countries during 2009–2018. One of the key explanatory variables is a Voter Awareness Index, based on Janku and Libich (2019) that is used to examine how structural budget balances differ between countries with different levels of voter awareness. The results indicate that countries with well-informed voters do not experience PBC, while those with poorly aware voters do. This study provides policy recommendations for improving voter awareness and weakening PBC.

Suggested Citation

  • Milutin Jesic & Aleksandra Prasceevic, 2023. "Voters’ Awareness as a Determinant of Political Budget Cycles: Evidence from Selected European Economies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 73(2), pages 162-188, June.
    • Handle: RePEc:fau:fauart:v:73:y:2023:i:2:p:162-188
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1518
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    More about this item

    Keywords

    voters’ awareness; political budget cycles; system GMM method; post-transition countries; low- and middle-income countries;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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