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The Destabilizing Effects of Political Budget Cycles: The Case of Greece

In: Advances in Quantitative Economic Research

Author

Listed:
  • George Petrakos

    (Panteion University of Social and Political Sciences)

  • Konstantinos Rontos

    (University of the Aegean)

  • Chara Vavoura

    (University of Athens)

  • Ioannis Vavouras

    (Panteion University of Social and Political Sciences)

Abstract

During the Third Hellenic Republic (Metapolitefsi), that is over the last four decades, Greece has been characterized by severe political fiscal cycles. Regardless of how we measure political fiscal cycles, via the actual budget balance as percent of GDP or via the primary budget balance as percent of GDP, we consistently observe that, in the years of general (parliamentary) elections, the budget deficit jumps to rates unprecedented for a developed economy. This phenomenon has contributed significantly to the recent Greek public debt crisis. In this paper, we have two main objectives. Firstly, we aim to confirm the emergence of political fiscal cycles in Greece during the period known as the Third Hellenic Republic (Metapolitefsi) beginning at 1974. Secondly, we investigate whether general elections affect not only public finances, but also the total output of the economy and try to characterize this effect as stabilizing or destabilizing. Two are the main findings of our analysis: the Greek economy is indeed characterized by very sharp political fiscal cycles during the period of the Third Hellenic Republic and that these cycles have a destabilizing effect on the total output of the economy.

Suggested Citation

  • George Petrakos & Konstantinos Rontos & Chara Vavoura & Ioannis Vavouras, 2022. "The Destabilizing Effects of Political Budget Cycles: The Case of Greece," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Advances in Quantitative Economic Research, chapter 0, pages 129-141, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-98179-2_10
    DOI: 10.1007/978-3-030-98179-2_10
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    More about this item

    Keywords

    Political budget cycles; Electoral fiscal cycles; Budget balance; Economic growth; Greek economy; Economic destabilization;
    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
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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