Political business cycle and fiscal discipline in Sub-Saharan Africa

• Obakemi, Funsho ^[1] ; Adebowale, Hammed Adesola ^[1] ; Yusuf , Babatunde Nageri ; Nev, Timothy Terwase ^[2]
  1. [1] University of Ilorin

     University of Ilorin

     Nigeria

     
  2. [2] University of Agriculture

     University of Agriculture

     Pakistán

     
• Localización: European Journal of Government and Economics, ISSN-e 2254-7088, Vol. 10, No. 2, 2021, págs. 185-205
• Idioma: inglés
• DOI: 10.17979/ejge.2021.10.2.6787
• Enlaces
  • Texto completo
• Resumen

  • We tested the Political Business Cycle theory in Sub-Sahara Africa. To provide an empirical explanation for this nexus, this paper used unbalanced panel data from thirty-six (36) Sub-Saharan African countries between 1990 and 2018. The system Generalized Method of Moment (GMM) developed by Arrelano-Bover/Blundell-Bond was employed to analyze the collected data. The results of the system GMM revealed that the fiscal deficit is significantly large in election years and the deficit spending spills into the year after the election, though not as high as in the election year. We could not, however, find a significant effect in the pre-election year. In addition, we found evidence suggesting that though democracy significantly lowers the fiscal deficit, it promotes higher deficit spending in the election year and the year after the election. Hence, the study established the existence of a political business cycle in Sub-Saharan African countries. The study thus recommends that sound economic policies should be put in place to reduce the persistent deficit in SSA so as to maintain sustainable fiscal health, as well as the sustainability of macroeconomics, particularly enhanced industrialization, as the study found that countries' fiscal deficits are lower in more industrialized countries in the region.

• Referencias bibliográficas
  • Acemoglu, D., Johnson, J., Robinson, A., and Thaicharoen, Y. (2003). Institutional causes, macroeconomics symptoms: Volatility, crises and...
  • Acemoglu, D., Johnson, S and Robinson, J. A. (2001). The colonial origins of comparative development: An empirical investigation. American...
  • Adeyi, V. A. (2014) Money in political parties and democracy in Nigeria. Kuru. National Institute of Policy and Strategic Studies 2(5), 289-313.
  • African Elections Data Base (2016). Elections in Nigeria. Retrieved from http://www.africanelections.org
  • Aidt, T., F., & Veiga, L. (2011). ‘Election results and opportunistic policies: A new test of the rational political business cycle model’....
  • Aidt T., Asatryan, Z., Badalyan L., & Heinemann, F. (2015). Vote buying or Political Business Cycles as Usual? ZEW Discussion Paper No.15-017....
  • Akhmedov, A. & Zhuravskaya, E. (2004). ‘Opportunistic political cycles: Test in a young democracy setting. Quarterly Journal of Economics...
  • Alesina, A., & Tabellini. G. (1990). “Voting on the budget deficit.” American Economic Review 80(1), 37-49
  • Alesina, A., & Paradisi, M. (2017). Political budget cycles: Evidence from Italian cities. Economics & Politics 29(2), 157-177. https://doi.org/10.1111/ecpo.12091
  • Alesina, A., & Perotti, D. (1999). Budget deficits and budget institutions, NBER Chapters, Fiscal Institutions and Fiscal Performance...
  • Alesina, A., & Tabellini. 1990. “Voting on the budget deficit,” American Economic Review 80(1), 37-49.
  • Arjomanda, M., Emamib, K., & Salimic, F. (2016). Growth and productivity: The role of budget deficit in the MENA selected countries. Procedia...
  • Arowolo, D. (2011) Fiscal federalism in Nigeria: Theory and dimensions. Afro Asian Journal of Social Sciences 2(22), 1-22.
  • Arrelano, M., & Bond, S. (1991). “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations....
  • Blundell, R. & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87, 115-143....
  • Balaguer-Coll, M. T., Brun-Martos, M. I., Forte, A., & Tortosa-Ausina, E. (2015). Local governments' re-election and its determinants:...
  • Baltagi, B.H. (2008). Econometric Analysis of Panel Data. 6th Edition, Wiley, Chichester.
  • Barberia, L. G. & Avelino, G. (2011). ‘Do political budget cycles differ in Latin American Democracies? Economia 11, 101–134. https://doi.org/10.1353/eco.2011.0001
  • Batool, I., & Sieg, G. (2009). Pakistan, politics and political business cycles. Working Paper Series, No. 7, Technische Universität Braunschweig,...
  • Bhatia, H.L. (2003). Public Finance: Vikas Publishing House Pvt Limited.
  • Block, S. A. (2002). Political business cycles, democratization and economic reform: The case of Africa. Journal of Development Economics...
  • Block, S. A., Ferree, K., & Singh, S. (2003). Multiparty competition, founding elections and political business cycles in Africa. Journal...
  • Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87,...
  • Bohn, F. (2018). Political budget cycles, incumbency advantage, and propaganda. Economics & Politics. 2, 1-28. https://doi.org/10.1111/ecpo.12122
  • Brender, A., & Drazen, A. (2008). “How do budget deficits and economic growth affect re-election prospects?” Evidence from a large cross-section...
  • Buscemi, A., & Yallwe, A. H. (2012). Fiscal deficit, national saving and sustainability of economic growth in emerging economies: A dynamic...
  • Cinar, M., ˙Ilhan, E.G., & Baki, D. (2014). Examining the role of budget deficit policies in economic growth from a Keynesian Perspective....
  • Chortareas, G., Logothetis, V., & Papandreou, A. A. (2016). Political budget cycles and re-election prospects in Greece's Municipalities....
  • Collier, P., & Vicente, P. C. (2010). Violence, bribery, and fraud: The political economy of elections in Sub-Saharan Africa. Oxford University...
  • De Haan, J., & Klomp, J. (2013). Conditional political budget cycles: A review of recent evidence. Public Choice 157, 387–410. https://doi.org/10.1007/s11127-013-0106-6
  • Drazen, A., & Eslava M. (2010). Electoral manipulation via voter friendly spending: Theory and evidence. Journal of Development Economics...
  • Drazen, A., & Eslava, M. (2005). Electoral manipulation via expenditure composition: Theory and evidence, Working Paper 11085, Cambridge,...
  • Ebeke, C., & Ölçer, D. (2013). Fiscal Policy over the election cycle in low-income countries, IMF working paper WP/13/153. https://doi.org/10.5089/9781475588514.001
  • Enkelmann, S., & Leibrecht, M. (2013). Political expenditure cycles and election outcomes: Evidence from disaggregation of public expenditures...
  • Fabrizio, S., & Mody, A. (2006). Can budget institutions counteract political indiscipline? European Economic Review 54(2), 269–278.
  • Fatás, A., & Mihov, I. (2006). The macroeconomic effects of fiscal rules in the US States. Journal of Public- Economics 90(1-2), 101-1...
  • Ferree, K. E., Gibson, C. C., & Long, J. D. (2014). Voting behavior and electoral irregularities in Kenya’s 2013 election. Journal of...
  • Grier, K. (2008). Presidential elections and real gdp growth in the USA, 1961 – 2004. Public Choice 135(3- 4), 337-352. https://doi.org/10.1007/s11127-007-9266-6
  • Higashijima, M. (2016). Political business cycles in dictatorships. WIAS Discussion Paper No.2016-002
  • Haider, A. S. M., Shakil, S., Fatema, S., & Rezaul, K. M. (2016). Impact of budget deficit on growth: An empirical case study on Bangladesh....
  • Hassan, B. S., & Hassan, A. O. (2011). Ethnic politics and its implications for the survival of democracy in Nigeria. Journal of Public...
  • Hibbs, D. (1977) Political parties and macroeconomic policy. American Political Science Review 71(14), 67-87. https://doi.org/10.1017/S0003055400269712
  • Hussain, M.E., & Haque, M. (2017). Fiscal deficit and its impact on economic growth: Evidence from Bangladesh. Economies 5(37), 1-19....
  • Ifere, E. O., & Okoi, O. B. (2018). Political economy of fiscal deficits in a democracy. Economia 19(1), 12–23. https://doi.org/10.1016/j.econ.2017.10.002
  • Jensen, P. S. & Justesen, M. K. (2014). Poverty and vote buying: Survey-based evidence from Africa. Electoral Studies 33(2), 220–232....
  • Jochimsen, B., & Nuscheler, R. (2011). The political economy of the German Länder deficits: Weak governments meet strong finance ministers....
  • Jones, M. P., Meloni, O., & Tommasi, M. (2012). Voters as fiscal liberals: Incentives and accountability in federal systems. Economics...
  • Klomp, J., & De Haan, J. (2012a). Political budget cycles and election outcomes. Public Choice 2(1), 1-23. https://doi.org/10.1007/s11127-012-9943-y
  • Klomp, J., & de Haan, J. (2012b). Conditional Election and Partisan Cycles in Government Support to the Agricultural Sector: An Empirical...
  • Klomp, J. & De Haan, J. (2013). Do political budget cycles really exist? Applied Economics 45(3), 329-341. https://doi.org/10.1080/00036846.2011.599787
  • Kneebone, R. & McKenzie, K. (2001). “Electoral and partisan cycles in fiscal policy: An examination of Canadian Provinces. International...
  • KoKsal, B., Ahmet C., & Kan, A. (2012). Political business cycles and partisan politics: Evidence from a developing economy. Economic...
  • Krause, G. A. (2005). Electoral incentives, political business cycles and macroeconomic performance: Empirical evidence from post-war US personal...
  • Lewis-Beck, M. S. (1990). Economics and elections: The major western democracies, Ann Arbor, MI, University of Michigan Press. https://doi.org/10.3998/mpub.8153
  • Lilly, B. (2012). The canadian political business cycle. The Economic and Business History Society 5, 1-38.
  • Maltritz, D. (2015). Determinants of budget deficits in Europe: The role and relation of fiscal rules, fiscal councils, creative accounting...
  • Manasse, P. (2006). Pro-cyclical Fiscal Policy: Shocks, rules, and institutions-A view from Mars. IMF Working Paper WP/06/27. https://doi.org/10.5089/9781451862874.001
  • Mandon, P., & Cazals, A. (2019). Political budget cycles: Manipulation by leaders versus manipulation by researchers? Evidence from a...
  • Mohanty, R. K. (2012). Fiscal deficit-economic growth nexus in India: A cointegration analysis. Ph.D. Dissertation. Centre for Economic Studies...
  • Moschovis, G. (2010). Public spending allocation, fiscal performance and corruption. Economic Papers, 29(1), 64–79. https://doi.org/10.1111/j.1759-3441.2010.00048.x
  • Mosley, P. & Chiripanhura, B. (2016). The African political business cycle: Varieties of experience. Journal of Development Studies 52...
  • Nayab, H. (2015). The relationship between budget deficit and economic growth of Pakistan. Journal of Economics and Sustainable Development...
  • Navaratnam, R. and Mayandy, K. (2016). Causal nexus between fiscal deficit and economic growth: Empirical evidence from South Asia. International...
  • Neuman, R., & Ssozi, J. (2016). Political influence on fiscal and monetary policy in Sub-Saharan Africa. Journal of African Economies...
  • Nordhaus, W. (1975). The political business cycle. Review of Economic Studies 42, 169-90. https://doi.org/10.2307/2296528
  • North, D. C. (1990a). Institutions, institutional change, and economic performance. Cambridge University Press, Cambridge.
  • North D. C. (2005b). Institutions and the performance of economics over time. In: Me´nard C, Shirley MM (eds) Handbook of new institutional...
  • Obinyeluaku, M. I. (2006). Testing the fiscal theory of price level in Nigeria, University of KwaZulu-Natal Discussion Papers Series No. 58.
  • Odhiambo, S. O., Momanyi, O., Othuon, L., & Fredrick, O. A. (2013). The relationship between fiscal deficits and economic growth in Kenya:...
  • Onye, K U., & Okon, J.U. (2017). Fiscal policy and monetary integration in WAMZ. An AERC Thematic Paper, WPS.
  • Persson, T., & Tabellini, G. E. (2003). “Do electoral cycles differ across political systems?” IGIER Working Paper No. 232: 1-19. https://doi.org/10.2139/ssrn.392643
  • Persson, T., Tabellini, G. E. (1990). Macroeconomic policy, credibility and politics. New York: Harwood Academic Publishers. University of...
  • Potrafke, N. (2010). The growth of public health expenditures in OECD countries: Do government ideology and electoral motives matter? Journal...
  • Rana, E. A., & Wahid, A. N. M. (2016). Fiscal deficit and economic growth in Bangladesh: A time-series analysis. The American Economist...
  • Rogoff, K. (1990). "Equilibrium political budget cycles," American Economic Review 80, 21-36.
  • Rogoff, K., & Sibert, A. (1988). Elections and macroeconomic policy cycles. The Review of Economic Studies 55, 1-16. https://doi.org/10.2307/2297526
  • Roodman, D. (2009). “How to do xtabond2: An introduction to difference and system GMM in Stata.” The Stata Journal 9(1), 86-136. https://doi.org/10.1177/1536867X0900900106
  • Shi, M and Svensson, J. (2002). 'Conditional Political Budget Cycles'. London, Centre for Economic Policy Research.
  • https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3352
  • Sucharita, S. & Sethi, N. (2012). Fiscal discipline in India. Romanian Journal of Fiscal Policy 2(1), 1-23.
  • Alesina, A. G., & Tabellini. (1990). “A positive theory of fiscal deficits and government debt. Review of Economic Studies 57(3), 403-414....
  • Tujula, M., & Wolswijk, G. (2007). What determines fiscal balances? An empirical investigation in determinants of changes in OECD countries....
  • Udoh, E., Joshua, N., & Etok, E. A. (2012). Political regime type, liberalization and fiscal deficits in developing countries: Evidence...
  • Van de Walle, N. (2003). Presidentialism and Clientelism in Africa’s Emerging Party Systems. The Journal of Modern African Studies 41(2),...
  • Vicente, C. P. (2014). Is vote buying effective? Evidence from a field experiment in West Africa. Economic Journal 124 (574), 356–387. https://doi.org/10.1111/ecoj.12086
  • Wyplosz, C., & Kostrup, S. (2010). “A common pool theory of supranational deficit ceilings”. Journal of Development Economics 73(1), 125-154.
  • Yaru, M.A., Mobolaji, H. I., Kilishi, A.A., & Yakubu, A.T. (2014). Budgetary institutions and fiscal discipline in Nigeria. Annual Conference...