Political Business Cycles and Fiscal Policies in Developing Countries

This paper empirically studies fiscal policies around elections in thirty-five developing countries. It finds that governments try to improve their reelection prospects with the help of expansionary fiscal policies. Rising fiscal deficits before elections are followed by fiscal consolidation afterwards. These cycles can be found particularly in countries which are less trade oriented. Certain IMF-supported programs contribute to fiscal stabilization. Copyright 1996 by WWZ and Helbing & Lichtenhahn Verlag AG