Political Business Cycle and Electoral Forecast: Does Local Financial Condition Worsen When Electoral Victory Seems (Un)Likely?

This study extends the political business cycle framework by emphasizing incumbents' electoral expectations as a key influence on fiscal behavior. Conventional models assume that politicians increase spending or reduce taxes before elections to maximize voter support. Yet incumbents rarely act under full uncertainty; their choices depend on perceived chances of reelection drawn from polls, past results, and other political signals. Focusing on local governments, this study argues that confident incumbents should moderate opportunistic spending, while those facing electoral risk intensify it. Evidence from South Korean municipalities shows that election periods are marked by weakened financial conditions. However, even incumbents with strong prospects continue expansionary behavior, suggesting they seek to reduce electoral uncertainty. Progressive executives tend to finance spending with debt, while conservatives rely on liquidity adjustments. Term‐limited officials exhibit limited cyclical behavior. These results indicate that fiscal manipulation reflects not only electoral timing but also how incumbents interpret uncertainty. Related Articles Pulatov, Abdullo, & Ahmad Hassan Ahmad. 2021. “Political Business Cycles in Post‐Communist European Countries.” Politics & Policy 49(5): 1248–1269. https://doi.org/10.1111/polp.12427 . Adra, Samer. 2022. “Monetary Policy and Anxious Presidents: The Effects of Monetary Shocks on Presidential Job Approval.” Politics & Policy 50(2): 244–273. https://doi.org/10.1111/polp.12456 . Cho, Sungdai, and Garry Young. 2008. “The Asymmetric Impact of Inflation on Presidential Approval.” Politics & Policy 30(3): 401–30. https://doi.org/10.1111/j.1747‐1346.2002.tb00128.x .