Political Budget Cycles. Evidence from Romania

Abstract

Political budget cycle (PBC) refers to the cyclical fluctuation of fiscal policies determined by political cycles, respectively by the time of elections.. More precisely, it consists in the opportunistic behavior of governments, of politicians, regardless of their ideology, who try to use fiscal-budgetary policies to increase their chances of re-election. Using the Generalized Model of Moments, this article analyzes the impact of the political cycle on the budgetary and fiscal policy in Romania in the period 2006-2022. The results of the empirical model show a positive link between the political cycle and expenditures, which means that politicians use an opportunistically expansionist spending policy in election years to gain advantages for themselves and/or the parties they belong to. Also, the constructed model shows a negative connection between the political cycle and the national budget revenues.

Keywords

• political cycles
• political budget cycles
• budget policy
• fiscal policy
• generalized model of moments (gmm)