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Political Budget Cycles in the Context of a Transition Economy: The Case of Albania

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  • Endrit Lami

    (Martin Luther University Halle-Wittenberg
    Ministry of Finance and Economy of Albania)

Abstract

There is growing research on the political budget cycles in transition economies whose institutions, economies and societies differ significantly from those of developed countries. New democracies are more vulnerable to political budget (fiscal) cycles. Most studies focus on policy instruments (e.g. fiscal policies) rather than on macroeconomic outcomes. In this paper, we analyse the political budget/fiscal cycle in Albania, a transition post-communist country. We analyse monthly data on the budget balance (deficit). The findings show a strong difference in deficits during pre- and post-election quarters, which do not appear when econometric analysis is replicated on annually collapsed data. This paper highlights the importance of distinguishing between types of elections according to their outcomes. Electoral competitiveness (heightened incumbents’ fear of elections loss), lower management efficiency, incumbent’s carelessness about the budget situation during the mandate of political rivals and higher corruption can all be associated with elections that yield rotation (change of the party/coalition in power), thus resulting in a higher budget deficit.

Suggested Citation

  • Endrit Lami, 2023. "Political Budget Cycles in the Context of a Transition Economy: The Case of Albania," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(2), pages 221-262, June.
    • Handle: RePEc:pal:compes:v:65:y:2023:i:2:d:10.1057_s41294-022-00191-6
    DOI: 10.1057/s41294-022-00191-6
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    More about this item

    Keywords

    Political budget cycles; Budget balance (deficit); Transition economies; Election outcomes;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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