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1 – 10 of over 7000Thanh Cong Nguyen and Thi Linh Tran
This paper examines the political budget cycles in emerging and developing countries using a sample of 91 countries from 1992 to 2019.
Abstract
Purpose
This paper examines the political budget cycles in emerging and developing countries using a sample of 91 countries from 1992 to 2019.
Design/methodology/approach
This paper employs a pooled ordinary least squares (OLS) model with clustered standard errors at the country level. To address endogeneity issues, the authors also employ a two-step system generalized methods of moments model.
Findings
The authors find clear evidence of political budget cycles in emerging and developing countries. The authors consistently find that incumbents increase total government spending, particularly in economic affairs, public services and social welfare, in the year before an election and the election year. In contrast, they contract spending in the year after an election.
Research limitations/implications
Policymakers should be aware of the political budget cycles during election years. Promoting control of corruption and democracy helps to alleviate the effects of the political budget cycles in emerging and developing countries.
Originality/value
The authors are among the first to explore the political budget cycles in emerging and developing countries by focusing on the total government spending and its main compositions, including expenditures on economic affairs, public services and social welfare. Besides, the authors also explore the conditioning effects of control of corruption, political ideology and democracy.
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The purpose of this paper is to study the impact of transparency on the political budget cycle (PBC) over time and across countries. So far, the literature on electoral cycles…
Abstract
Purpose
The purpose of this paper is to study the impact of transparency on the political budget cycle (PBC) over time and across countries. So far, the literature on electoral cycles finds evidence that cycles depend on the stage of an economy. However, the author shows – for the first time – a reliance of the budget cycle on transparency. The author uses a new data set consisting of 99 developing and 34 Organization for Economic Cooperation and Development countries. First, the author develops a model and demonstrates that transparency mitigates the political cycles. Second, the author confirms the proposition through the econometric assessment. The author uses time series data from 1970 to 2014 and discovers smaller cycles in countries with higher transparency, especially G8 countries.
Design/methodology/approach
Mathematical model and a respective econometric model testing.
Findings
First, the author shows in the theoretical model that higher transparency mitigates the PBC. Second, the author confirms the theoretical proposition through the econometric model. The author confirms that the countries with higher transparency have smaller budget cycles. Or technically, the author cannot reject the null-hypothesis that the budget cycles are different due to transparency.
Research limitations/implications
As explained in the paper: one issue is the data limitations in respect to the transparency measures. Data for Google are just available since 2004. Data for broadband-subscription are just on annual frequency. But both limitations can be tackled in the future. Hence, the findings are first evidence and a benchmark for future studies.
Practical implications
First, higher public transparency implies smaller budget cycles. In the end, this enhances the stability of economic and fiscal policy. Second, policy-makers have to consider the impact of higher transparency in respect to future election pledges. In a more transparent world, all voters can easily check the commitment of previous election pledges.
Social implications
Transparency helps to improve democracy and thus enhances the political credibility because it allows the voters to check the commitment of the elected policy-makers.
Originality/value
First, the author shows – for the first time – a reliance of the budget cycle on transparency. Second, the author is the first that build a new theoretical model that extends the existing literature in respect to transparency and the size of the budget cycle. Third, the author uses for the first time – in this literature – new internet-based data such as broadband-subscription and Google search data. Fourth, the author empirically proves the new hypothesis based on the new data sources.
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Investigates the possible occurrences of patterns in macroeconomic policy targeting and instruments use in some less developed countries where unscheduled regime transfers may…
Abstract
Investigates the possible occurrences of patterns in macroeconomic policy targeting and instruments use in some less developed countries where unscheduled regime transfers may occur. The patterns are held to correspond to those stipulated by Hibbs in his Partisan Theory for advanced democracies after due allowance is made for the nature of government and modes of regime transfer. Undertakes an investigation of Sudan, a country which has witnessed dramatic political changes that assumed the forms of eight alternating regimes in the shape of civilian democracies and military dictatorships since its independence in 1956. Traces, in particular, the evidence on quasi‐political business cycles in output growth and inflation; and on quasi‐political budget cycles in deficits and instruments of finance. Studies patterns on the form of use of policy instruments through reliance on monetary policy surprises. Obtains empirical results which generally point to the possible presence of eco‐political patterns similar in principle to those operable in the case of developed countries but with some distinct differences in nature and rhythm.
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The purpose of this paper is to find the relationship between local direct elections and the change in social spending, controlling for GDP per capita, revenues and wide-range…
Abstract
Purpose
The purpose of this paper is to find the relationship between local direct elections and the change in social spending, controlling for GDP per capita, revenues and wide-range socio-welfare indicators at the regional level.
Design/methodology/approach
This research uses a model of time-series cross-sectional panel data set for 33 provinces in Indonesia from 2001 to 2012.
Findings
The main finding of this research is that the political budget cycle does exist in Indonesia. Incumbents responded to the direct elections more sensitively rather than to other variables in the model. The most important variables that are significant in the model are not only direct election but also inter-governmental grants. Interestingly, the local economy (as measured by GDP per capita) does not clearly exhibit a meaningful impact.
Research limitations/implications
Although the importance of decentralisation in Indonesia is actually at the regency level, obtaining the data is really challenging. Therefore the exercise on this paper is currently limited only for the provincial level.
Practical implications
This finding conveys the message that there is large room for improvement in inter-governmental transfer formulation, more importantly to the regions where they still entail significant budget support from central government. In addition, transfers during specific periods such as elections need to be modified to avoid the misappropriation of local budget and to mitigate the adverse impact of PBC. The formulation of inter-governmental transfers is pivotal in reducing over-dependence to the central government funding and to ensure the effectiveness of budget devolved at the local level.
Originality/value
To the author’s understanding, the paper is the first to discuss the presence of the political budget cycle on social protection programs in Indonesia. The expected contribution of the current work is twofold: Firstly, the author used a recent data set hosted by the World Bank (INDO-DAPOER). Secondly, the findings are relevant to the discussion within the sphere of development studies and political science.
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The aim of this paper is to explore whether and how external, political, financial and governance factors influence capital expenditure deviations in the Swedish municipal water…
Abstract
Purpose
The aim of this paper is to explore whether and how external, political, financial and governance factors influence capital expenditure deviations in the Swedish municipal water and sewerage sector and to capture the consequences of municipal organisational fragmentation.
Design/methodology/approach
Panel data analysis of 238 municipalities and 1,190 observations of capital expenditure deviations over five years (2013–2017).
Findings
Apart from a low overall on average execution rate of 69%, the Swedish municipal water and sewerage sector seems generally sensitive to external stakeholder pressure for budget compliance, but not to the political power situation. Further, political signalling incentives generally do not influence capital expenditure deviations in the contexts of municipal corporations and cooperations, which supports the idea that these governance forms insulate the organisation from general stakeholder pressure and political control.
Practical implications
The practical implication is that large and constant capital expenditure deviations call for change in regulation and governance of the municipal sector. However, in countries such as Sweden, where externalising services to municipal corporations and cooperations is significant, this discussion needs to address the consolidated level of the municipality. Otherwise, a large share of the investment budget will be unscrutinised. More closely related to the Swedish water and sewerage sector, the risks associated with a constantly low execution rate should be analysed and addressed.
Originality/value
First, this paper contributes to the knowledge of aggregated capital expenditure deviations in general and specifically within the municipal water and sewerage sector. Second, analysing the municipal governance landscape adds further insights and suggestions on why budget performance varies. The results especially highlight that the governance forms of corporations and cooperations change the relation to political signalling incentives.
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Yuliya Kasperskaya and Ramon Xifré
The objective of this study is to analyze the role that budgetary analytical capacity (BAC) plays for fiscal discipline in a sample of Eurozone countries in the postcrisis period.
Abstract
Purpose
The objective of this study is to analyze the role that budgetary analytical capacity (BAC) plays for fiscal discipline in a sample of Eurozone countries in the postcrisis period.
Dessign/methodology/approach
Building on the policy capacity literature, an index for the BAC is constructed by including OECD budgetary data from three dimensions: reliability of projections, openness to legislative scrutiny and transparency. The proposed BAC index is validated by checking that larger values of the index are associated with the higher fiscal discipline scores across countries.
Findings
Controlling for the economic cycle, BAC index is positively associated with fiscal discipline. The association is stronger for the index as a whole than for the three separate dimensions.
Research limitations/implications
The study is done on the limited sample of countries, and it is not feasible to validate results over time.
Practical implications
Budgetary policymakers can improve fiscal discipline by enhancing the three pillars that support the BAC.
Social implications
Stronger BAC can help to improve the quality of public decision-making and overcome political opportunism.
Originality/value
This is the first study that introduces the concept of BAC, makes it operational and suggests its relevance for supporting fiscal discipline.
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Tilman Slembeck, Armin Jans and Thomas Leu
Financial sustainability requires governments to run sufficiently large primary surpluses going forward to cover the cost of servicing its debt budgets to balance in the long run…
Abstract
Financial sustainability requires governments to run sufficiently large primary surpluses going forward to cover the cost of servicing its debt budgets to balance in the long run. In democracies, politicians who strive for reelection often tend to systematically violate this tenet. This paper discusses two types of “anchors” that may be used to cope with this problem by limiting the room for new and excessive public debt. First, we analyze national constitutional safeguards on the basis of the “debt brake” in Switzerland and Germany. Second, we discuss international institutions to maintain financial discipline, referring to the Maastricht-criteria. These anchors are designed to allow policymakers to commit to policies that provide long term financial stability and sustainability of public finances. However, as the recent crises have shown, the problem of time inconsistency in policy making remains, especially when anchors are weak. Therefore, the paper discusses the circumstances under which institutional anchors may help to restrict politician behavior to promote sustainability of public finances. We conclude by indentifying three conditions required for the proper functioning of collective anchors in the context of public finances.
Alessandro Giosi, Silvia Testarmata, Sandro Brunelli and Bianca Staglianò
Recently many European countries have incurred crises in public finance despite the fact that EU institutions have pushed the national governments toward the sustainability of…
Abstract
Recently many European countries have incurred crises in public finance despite the fact that EU institutions have pushed the national governments toward the sustainability of public finance with compulsory and voluntary rules regarding fiscal governance. This paper investigates the relations between the quality of fiscal governance and the financial virtuosity of national fiscal policy. We proposed a general framework for analyzing the fiscal governance issue and we empirically tested the correlation between the dimensions of fiscal governance and the budgetary performance of EU countries. The results showed a positive correlation between the quality of fiscal governance in the EU countries and financial surplus in the period concerned. However further investigations are needed and an effort should be made to collect uniform data on fiscal governance in the European Union.
Using a political economy framework, this paper examines the financing trend, by investigating three systematic spikes occurring between 2004 and 2016. The study aims to provide a…
Abstract
Purpose
Using a political economy framework, this paper examines the financing trend, by investigating three systematic spikes occurring between 2004 and 2016. The study aims to provide a useful review of the interaction of politics, financial decisions and educational outcomes. Additionally it provides a useful guide, especially to academics, to identify political and economic conceptualizations that will predict expenditure decision-making of political actors and to be able to provide policy advice on the future effect of such decisions on availability and accessibility of public goods.
Design/methodology/approach
The paper adopts a secondary data analysis approach, drawing upon secondary data sources such as from the Ministry of Education, budget statements from the Ministry of Finance, as well as relevant policy documents. Additional information for the study was also extracted from the manifestos of the two leading political parties in Ghana – the New Patriotic Party and the National Democratic Congress and their viewpoints on financing of education in Ghana.
Findings
Using two epochal years when financing of education peaked (2008 and 2012), which coincided with election years, the trend lends itself to being interpreted as opportunistic spending. It appears to give credence to a conclusion that the increases in spending are more politically directed and nonneutral.
Originality/value
This paper fulfills an identified need to study the trend of basic education financing in Ghana, which will help policy actors make better-informed decisions with the introduction of the novel “adaptive opportunism” framework analysis tool.
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Moira Catania, Mark J. Baimbridge and Ioannis Litsios
The objective of this study is to understand the budgetary role of national legislatures in euro area (EA) countries and to analyse implications for fiscal discipline.
Abstract
Purpose
The objective of this study is to understand the budgetary role of national legislatures in euro area (EA) countries and to analyse implications for fiscal discipline.
Design/methodology/approach
Building on the budget institutions literature, a legislative budgetary power index for all the 19 euro area (EA) countries is constructed using Organisation for Economic Co-operation and Development (OECD) and European Commission data as well as data generated from questionnaires to national authorities. A two-way fixed effects panel data model is then used to assess the effect of legislative budgetary power on the budget balance in the EA during 2006–2015.
Findings
Overall, in the EA, formal legislative powers vis-à-vis the national budgetary process are weak, but there is more legislative involvement in Stability and Growth Pact (SGP) procedures, and legislative budgetary organisational capacity is generally quite good. In contrast to the traditional view in the budget institutions literature, this study’s empirical findings show that strong legislative budgetary power does not necessarily result in larger budget deficits.
Research limitations/implications
Data on legislative budgeting were available from different sources, and time series data were very limited.
Practical implications
There is scope to improve democratic legitimacy of the national budgetary process in the EA, without necessarily jeopardising fiscal discipline.
Originality/value
The constructed legislative budgetary power index covers all the 19 EA countries and has a broad scope covering various novel institutional characteristics. The empirical analysis contributes to the scarce literature on the impact of legislative budgeting on fiscal discipline.
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