Please use this identifier to cite or link to this item: http://hdl.handle.net/1822/61687

TitlePolitical budget forecast cycles
Author(s)Bohn, Frank
Veiga, Francisco José
KeywordsOpportunistic political cycles
Political budget cycles
Revenue forecasts
Deficit
Transfers
Asymmetric information
Political economy
Issue date2019
PublisherUniversidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
JournalNIPE Working Paper
Abstract(s)By forecasting overly optimistic revenues opportunistic governments can increase spending in order to appear more competent prior to elections. Ex post deficits emerge in election years, thereby producing political forecast cycles - as also found for US states in the empirical literature. In our theoretical moral hazard model we obtain three additional results which are tested with panel data for Portuguese municipalities. The extent of manipulations is reduced when (i) the winning margin is expected to widen; (ii) the incumbent is not re-running; and/or (iii) the share of informed voters (proxied by education) goes up.
TypeWorking paper
URIhttp://hdl.handle.net/1822/61687
Publisher versionhttps://www.eeg.uminho.pt/pt/investigar/nipe/Paginas/publicacoes.aspx
Peer-Reviewedno
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

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