Political Equality and Budget Cycles: GMM Analysis for OECD Countries

Abstract

The shaping of fiscal policies by political motives during election periods poses a significant challenge to budgetary discipline and macroeconomic stability in democratic countries. The existence and magnitude of this phenomenon, referred to as Political Budget Cycles (PBCs) in the literature, vary depending on the institutional quality of countries. This study examines the conditional role of political inequality in the emergence of PBCs within the context of Organisation for Economic Co-Operation and Development (OECD) countries. To this end, data from 38 OECD countries for the period 2004–2022 are analyzed using the Generalized Method of Moments (GMM), which accounts for endogeneity issues. Empirical findings reveal that political equality is a critical condition for the presence of PBCs: in countries with low political equality, budget balances deteriorate during election years. In contrast, in countries with high political equality, elections do not have a statistically significant effect on budget balances. These results indicate that political inequality is a key determinant of fiscal policy preferences during election periods and that institutional reforms strengthening political equality can also enhance fiscal discipline. The findings suggest that ensuring fiscal discipline during elections goes beyond applying technical fiscal rules.

Keywords

• Political Budget Cycles
• Political Inequality
• Fiscal Policy
• Elections

Politik Eşitlik ve Bütçe Döngüleri: OECD Ülkeleri İçin GMM Analizi

Abstract

Seçim dönemlerinde uygulanan maliye politikalarının politik gerekçelerle şekillendirilmesi demokratik ülkelerde mali disiplinin sağlanması açısından önemli bir sorun teşkil etmektedir. Politik Bütçe Döngüleri (PBD) olarak adlandırılan bu olgunun varlığı ve şiddeti ülkelerin kurumsal kalitesine göre farklılık göstermektedir. Bu çalışmada PBD’lerin ortaya çıkmasında politik eşitliğin oynadığı rol Ekonomik İşbirliği ve Kalkınma Örgütü (OECD) ülkeleri bağlamında ele alınmaktadır. 38 OECD ülkesinin 2004-2022 dönemi arasındaki yıllık verileri Genelleştirilmiş Momentler Modeli (GMM) yöntemiyle analiz edilmektedir. Ampirik bulgulara göre politik eşitsizliğin PBD’lerin varlığı için kritik bir koşul olduğu ortaya koyulmaktadır. Politik eşitliğin düşük olduğu ülkelerde seçim dönemlerinde bütçe dengesinin bozulduğu ve dolayısıyla mali disiplinin olumsuz etkilendiği tespit edilmiştir. Bu sonuçların yanında politik eşitliğin yüksek olduğu ülkelerde seçim dönemlerinin bütçe dengesi üzerinde istatistiksel olarak anlamlı bir etkisi bulunamamıştır. Ampirik sonuçlara göre ülkelerin kurumsal dinamikleri kamu mali yönetimini ve dolayısıyla mali disiplini belirleyen unsurlar arasında kabul edilebilir. Bu bulgular sonucunda politik eşitliği güçlendiren kurumsal reformların aynı zamanda mali disiplini de sağlayabileceği ortaya koyulmaktadır.

Keywords

• Politik Bütçe Döngüleri
• Politik Eşitlik
• Maliye Politikası
• Seçimler

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