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Political cycles, fiscal deficits and output spillovers in Europe

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  • André Sapir
  • Khalid Sekkat

Abstract

This paper investigates whether national elections in Europe generate political cycles in other European countries, and, if so, whether these spillover effects are likely to survive inside EMU. The paper first tests whether elections in Germany affect macroeconomic outcomes in other European countries and then investigates the impact of elections on budget deficits. The results indicate that German politics significantly impacts macroeconomic variables in other European countries, and also that politics significantly affects the behaviour of European budgetary policy. The prospect of elections tends to increase public deficits in recessions, whereas left-wing governments tend to be more deficit-prone than right-wing governments regardless of the state of the economy. Moreover, the existence of political cycles spillovers among European countries suggest that there may be a need for electoral coordination. Copyright 2002 by Kluwer Academic Publishers
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  • André Sapir & Khalid Sekkat, 2002. "Political cycles, fiscal deficits and output spillovers in Europe," ULB Institutional Repository 2013/7346, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/7346
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    Cited by:

    1. Carlos Martinez-Mongay & Khalid Sekkat, 2005. "Progressive Taxation, Macroeconomic Stabilization and efficiency in Europe," European Economy - Economic Papers 2008 - 2015 233, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Tansey, Michael & Raju, Sudhakar & Stellern, Michael, 2005. "Price controls, trade protectionism and political business cycles in the U.S. steel industry," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1097-1109, December.
    3. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    4. Carlos Martinez-Mongay & Khalid Sekkat, 2003. "The tradeoff between efficiency and macroeconomic stabilization in Europe," Working Papers CEB 04-024.RS, ULB -- Universite Libre de Bruxelles.
    5. Kh. Sekkat & J. Malek Mansour, 2005. "Exchange Rate Fluctuations, Trade and Asymmetric Shocks in the Economic and Monetary Union," International Finance, Wiley Blackwell, vol. 8(1), pages 119-137, March.
    6. Antoni Castells & Alejandro Esteller & Maite Vilalta, 2004. "Full Characterisation of the Political Economy of Fiscal Adjustment: Evidence from Spanish Municipalities," Working Papers 2004/3, Institut d'Economia de Barcelona (IEB).
    7. Marco Buti & André Sapir, 2002. "EMU in the Early Years: Differences and Credibility," Chapters, in: Marco Buti & André Sapir (ed.), EMU and Economic Policy in Europe, chapter 1, Edward Elgar Publishing.
    8. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    9. Antoni Castells & Alejandro Esteller & Maite Vilalta, 2004. "Full Characterisation of the Political Economy of Fiscal Adjustment: Evidence from Spanish Municipalities," Working Papers 2004/3, Institut d'Economia de Barcelona (IEB).
    10. J. Stephen Ferris & Stanley L. Winer, 2006. "Politics, political competition and the political budget cycle in Canada, 1870 - 2000: a search across alternative fiscal instruments," Carleton Economic Papers 06-05, Carleton University, Department of Economics.
    11. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.

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