Mooted signals: economic disturbances and political budget cycles



Document title: Mooted signals: economic disturbances and political budget cycles
Journal: Journal of applied economics
Database: CLASE
System number: 000401730
ISSN: 1667-6726
Authors: 1
Institutions: 1The World Bank, Washington, Distrito de Columbia. Estados Unidos de América
Year:
Season: Nov
Volumen: 15
Number: 2
Pages: 189-212
Country: Argentina
Language: Inglés
Document type: Artículo
Approach: Analítico, descriptivo
English abstract Governments can finance fiscal expansions with debt to appear competent and boost their electoral prospects, resulting in a political budget cycle. This article shows that economic disturbances blur competence signals, dampening political budget cycles. Economic disturbances can be construed at the aggregate level as economic volatility which is a consequence of decisions taken by diverse economic actors. The more actors that are not elected at the national level have an impact on economic performance, the more difficult it will be for voters to disentangle government-specific competence shocks. Fiscal decentralisation increases policy leverage of governing bodies that are not elected at the national level; economic openness affects the number of foreign economic actors that cannot be held locally accountable. These two factors therefore limit voters' ability to disentangle individual shocks to government competence, dampening strategic borrowing. The predictions receive empirical support from a time series-cross section analysis between 1980 and 2008
Disciplines: Economía
Keyword: Política económica,
Presupuesto estatal,
Volatilidad económica,
Descentralización fiscal,
Apertura económica
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