how do budget deficits and economic growth affect reelection prospects evidence from a large panel of countries conventional wisdom is that good economic conditions and expansionary fiscal policy help incumbents get reelected but this has not been tested in a large cross section of countries we test these arguments in a sample of 74 countries over the period 1960 2003 we find no evidence that deficits help reelection in any group of countries developed and less developed new and old democracies countries with different government or electoral systems and countries with different levels of democracy in developed countries and in old democracies election year deficits actually reduce the probability that a leader is reelected with similar although smaller negative electoral effects of deficits in the earlier years of an incumbent s term in office higher growth rates of real gdp per capita raise the probability of reelection only in the less developed countries and in new democracies but voters are affected by growth over the leader s term in office rather than in the election year itself and apparently only by growth not attributed to global growth low inflation is rewarded by voters only in the developed countries the effects we find are not only statistically significant but also quite substantial quantitatively we also suggest how the absence of a positive electoral effect of deficits can be consistent with the political deficit cycle found in new democracies

do voters vote ideologically abstract in this paper we address the following question to what extent is the hypothesis that voters vote ideologically i e they always vote for the candidate who is ideologically closest to them testable or falsifiable we show that using data only on how individuals vote in a single election the hypothesis that voters vote ideologically is irrefutable regardless of the number of candidates competing in the election on the other hand using data on how the same individuals vote in multiple elections the hypothesis that voters vote ideologically is potentially falsifiable and we provide general conditions under which the hypothesis can be tested

trade finance specialization and synchronization i investigate the determinants of business cycle synchronization across regions the linkages between trade in goods financial openness specialization and business cycle synchronization are evaluated in the context of a system of simultaneous equations the main results are as follows i specialization patterns have a sizable effect on business cycles most of this effect is independent of trade or financial policy but directly reflects differences in gdp per capita ii a variety of measures of financial integration suggest that economic regions with strong financial links are significantly more synchronized even though they also tend to be more specialized iii the estimated role of trade is closer to that implied by existing models once intra industry trade is held constant the results obtain in a variety of data sets measurement strategies and specifications they relate to a recent strand of international business cycle models with incomplete markets and transport costs and on the empir

international business cycle spillovers since the 1870s this article considers the evolution of international business cycle interdependencies among 27 developed and developing countries since the beginning of 1870s utilizing the generalized vector autoregressive var based spillover index of diebold and yilmaz 2012 which allows the construction of a time varying measure of business cycle spillovers we find that on average 65 of the forecast error variance of the 27 countries business cycle shocks is due to international spillovers however the magnitude of international business cycle spillovers varies considerably over time there is a clear increasing trend since the end of world war ii and until the mid 1980s after that international business cycle interdependencies declined during the period that was dubbed the great moderation and stabilized around the beginning of the twenty first century during the great recession of 2008 2009 international business cycle spillovers increased to unprecedented levels finally developed countries are cons

the determinants of vote intentions in portugal this paper offers new insights on theinteractions between economics and politicsin portugal we use two unexplored datasets consisting of monthly polls on voteintentions for the main political partiesin portugal and responses to a consumersurvey containing a battery of questions oneconomic evaluations the analysis coversthe interval from 1986 to 2001 we findthat 1 right wing governments arepenalized for higher inflation while theleft wing ones are not 2 left winggovernments are more penalized forincreases in the unemployment rate 3 voters base their evaluations ofincumbents performances on perceptions ofpast and current economic conditions rather than on expected future economicoutcomes

the effect of fiscal performance on local government election results in israel 1989 1998 abstract we discuss the circumstances under which voters in local elections will reward fiscal responsibility and suggest that such circumstances evolved in israel in the mid 1990s we present empirical evidence that indeed fiscal performance of mayors substantially affected their reelection probability in the 1998 campaign but not in the 1989 and 1993 campaigns changes in the political environment enforcement of audit and financial reporting requirements tougher imposition of hard budget constraints and the development of local media are proposed as explanations the hypotheses that the fiscal variables reflect the income level at the locality or the mayor s success in extracting resources from the central government are tested and rejected

two round elections one round determinants evidence from the french municipal elections using a new database of french municipalities that covers 821 towns and two elections 2001 and 2008 we examine how the budget structure degree of electoral competition and the economic context affect the share of votes for the incumbent we take into account the institutional details of the two round structure of the electoral process created by french electoral rules dual ballot under plurality rules we show that in the first round of the electoral process spending on equipment including infrastructures can influence the voter and that electoral competition has a strong impact on the incumbent s score in the second round the incumbent s vote is affected more by national considerations and local budget variables have no effect we show that the dynamics between the first and the second rounds are intense the results suggest that the determinants of each round s outcome in a two round electoral process are different

do closeness and stake increase voter turnout evidence from election results in small french towns in brittany abstractdo closeness and stake increase voter turnout evidence from election results in small french towns in brittany regional studies this article explores the determinants of second round voter turnout in small french towns with a focus on two hypotheses first an increase in the closeness of the race may lead to an increase in turnout second a higher seats stake that is a higher proportion of the total number of seats that remain to be filled in the second round of the election may increase turnout results show that increases in both closeness and seats stake lead to higher voter turnout thus evidence is given in favour of the assumption of rationality in voting in local elections

do political parties matter evidence from u s cities are cities as politically polarized as states and countries no is the answer from our regression discontinuity design analysis which shows that whether the mayor is a democrat or a republican does not affect the size of city government the allocation of local public spending or crime rates however there is a substantial incumbent effect for mayors we investigate three mechanisms that could account for the striking lack of partisan impact at the local level and find the most support for tiebout competition among localities within metropolitan areas

sales and monetary policy this paper analyses the efiect of monetary policy in a model where sales occur in equilibrium some consumers are loyal to a particular brand of a good others are bargain hunters as a result producers flnd it optimal to sell their goods at a normal price through some retailers and at a sale price through others the margin of adjusting the amount sold on sale is potentially very important if producers can adjust the fraction sold on sale with sticky prices and wages money is approximately neutral if we ignore the reasons behind sales but that result changes dramatically when we consider that producers optimally choose to sell some of their goods on sale owing to strategic substitutabilities in the sales decision money has strong procyclical efiects

the mechanical and psychological effects of electoral systems a quasi experimental study having two votes for the same election or two simultaneous elections with different electoral systems provides a golden opportunity to ascertain the impact of the electoral system and to sort out t

volatility transmission in emerging european foreign exchange markets abstract this paper studies the dynamics of volatility transmission between central european ce currencies and the eur usd foreign exchange using model free estimates of daily exchange rate volatility based on intraday data we formulate a flexible yet parsimonious parametric model in which the daily realized volatility of a given exchange rate depends both on its own lags as well as on the lagged realized volatilities of the other exchange rates we find evidence of statistically significant intra regional volatility spillovers among the ce foreign exchange markets with the exception of the czech and prior to the recent turbulent economic events polish currencies we find no significant spillovers running from the eur usd to the ce foreign exchange markets to measure the overall magnitude and evolution of volatility transmission over time we construct a dynamic version of the diebold yilmaz volatility spillover index and show that volatility spillovers tend to increase in periods characterized by market uncertainty

popularity functions based on the partisan theory this paper presents popularity function estimates for u s presidents which are based on a model in which voters evaluations reflect an understanding of partisan reputations for differing policies

business cycle transmission from the us to germany a structural factor approach abstract this paper investigates the transmission of us macroeconomic shocks to germany using a large dimensional structural dynamic factor model this framework allows us to investigate many transmission channels simultaneously including new channels such as stock markets foreign direct investment bank lending and the confidence channel we find that us shocks affect the us and germany largely symmetrically trade seems to be the most relevant transmission channel monetary policy reactions to strong price movements seem to play a role as well no clear conclusion can be drawn yet on the role of financial markets and the confidence channel negative domestic influences apparently more than offset positive us influences in the german economy between 1995 and 2000 but the us recession in 2001 appeared to be the main culprit in the german slump

business cycle synchronization during us recessions since the beginning of the 1870s this paper examines the synchronization of business cycles across the g7 countries during us recessions since the 1870 s using a dynamic measure of business cycle synchronization results depend on the globalisation period under consideration on average us recessions have significantly positive effects on business cycle co movements only in the period following the breakdown of the bretton woods system of fixed exchange rates while strongly decoupling effects among the g7 economies are documented during recessions that occurred under the classical gold standard during the 2007 2009 recession business cycles co movements increased to unprecedented levels

exporting recessions international links and the business cycle abstract empirical evidence of decoupling typically focuses on declining business cycle correlations at low frequencies at higher frequencies business cycles strongly co move during recessions but are largely independent during non recessionary periods

fiscal policy and reelection in brazilian municipalities this paper uses a new panel of more than 2 000 brazilian municipalities over 13 years to analyze the influence of public expenditures on the probability of mayors reelec tion we examine brazilian municipal elections from 1988 to 2000 using a logit fixed effects model the results suggest that mayors who spend more during their terms of office increase the probability of their own reelection or of a successor of the same political party in par ticular higher capital spending over the years preceding elections and current expenditures in election years are beneficial to brazilian incumbent mayors

the politics of ambiguity politicians face a trade off between the policies that maximize their chances of reelection and their most preferred policies or the policies most preferred by the constituency which they represent this paper analyzes this trade off in a dynamic electoral model in which the voters are not fully informed about the preferences of the incumbent first we show that the incumbent follows a policy which is intermediate between the other party s ideal policy and his own ideal policy second we show that often the incumbent has an incentive to choose procedures which make it difficult for voters to pinpoint his preferences with absolute precision thus politicians may prefer to be ambiguous

measuring financial asset return and volatility spillovers with application to global equity markets we provide a simple and intuitive measure of interdependence of asset returns and or volatilities in particular we formulate and examine precise and separate measures of return spillovers and volatility spillovers our framework facilitates study of both non crisis and crisis episodes including trends and bursts in spillovers and both turn out to be empirically important in particular in an analysis of sixteen global equity markets from the early 1990s to the present we find striking evidence of divergent behavior in the dynamics of return spillovers vs volatility spillovers return spillovers display a gently increasing trend but no bursts whereas volatility spillovers display no trend but clear bursts

economic policy economic performance and elections this paper explores the role of reelection pressures in determining economic policy by assuming that voters are uncertai n as to the efficacy of different policies a reelection process is derived that depends on both a politician s past policies and the level of economic activity during his time in office it is shown th at the less uncertain are voters as to which policy is best the more likely is a politician to manipulate policy for reelection purposes manipulation entails implementing the policy that is more likely to be well received rather than the one that maximizes income copyright 1993 by american economic association

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

election results and opportunistic policies a new test of the rational political business cycle model the literature on the rational pbc suggests that politicians systematically manipulate economic and fiscal conditions before elections to increase their chances of reelection most tests of this theory look for evidence of pre election distortions in fiscal policy we propose a new test that explores the two way interaction between the magnitude of the opportunistic distortion and the margin of victory the test is implemented using a large panel of portuguese municipalities the results show that opportunism leads to a larger win margin for the incumbent and that incumbents behave more opportunistically when their win margin is small these results are consistent with the theoretical model

measuring the world economy this paper provides an empirical assessment of whether the world economy has become smaller in terms of economic distance over the last decades we adopt a cross sectional spatial econometric approach relating domestic output volatility to distance weighted averages of other countries output volatility using a sample of 135 countries and rolling 10 year time windows over the period 1955 to 2006 using descriptive measures test statistics and spatial econometric estimates we find that cross country interdependence was virtually insignificant in the early post war period but has increased strongly from the mid 1960s to the mid 1980s and remained at a high level since then results for the most recent period suggest that common shocks to output volatility have a magnified impact and roughly quadruplicate through international spillover effects which are transmitted through both trade and financial openness

electoral manipulation via voter friendly spending theory and evidence abstract we present a model of the political budget cycle in which incumbents try to influence voters by changing the composition of government spending rather than overall spending or revenues rational voters may support an incumbent who targets them with spending before the election even though such spending may be due to opportunistic manipulation because it may also reflect sincere preference of the incumbent for types of spending voters favor classifying expenditures into those which are likely targeted to voters and those that are not we provide evidence supporting our model in data on local public finances for all colombian municipalities our findings indicate both a pre electoral increase in targeted expenditures combined with a contraction of other types of expenditure and a voter response to targeting

are elections debt brakes evidence from french municipalities we show that voters are fiscal conservatives although in the long run only while the average over the mandate level of debt has a negative impact on the probability of reelection pre election debt accumulation by incumbents increases their probability of reelection as the negative impact becomes larger as the debt level becomes higher it compensates for the short run effect elections thus appear as a disciplining device even if a weak one

trade interdependence and the international business cycle a stochastic general equilibrium model of the world economy is developed to analyze the contribution of trade interdependence to international business cycles we test some of the implications of the model using data from ten major industrial countries and a variety of detrending techniques to calculate the cyclical component of output we find that the significance of trade in the transmission of economic disturbances across countries is not robust to the choice of the detrending method in general the role of trade interdependence is moderate and seem to have been stronger in the period before 1973

sources and propagation of international output cycles common shocks or transmission abstract this paper studies the generation and transmission of international cycles in a multi country model with production and consumption interdependencies two sources of disturbance are considered and three channels of propagation are compared technology disturbances which are mildly correlated across countries are more successful than government expenditure disturbances in reproducing actual data the presence of a common component to the shocks and of production interdependencies appear to be crucial in quantitatively matching the properties of the data

opportunistic political cycles test in a young democracy setting this paper tests the theory of opportunistic cycles in a decade old democracy russia finds strong evidence of cycles and provides an explanation for why previous literature often found weaker evidence using regional monthly panel data we find that 1 the budget cycle is sizable and short lived public spending shifts toward direct monetary transfers to voters 2 the magnitude of the cycle decreases with democracy government transparency media freedom voter awareness and over time and 3 preelectoral manipulation increases incumbents chances for reelection the short length of the cycle explains underestimation of its size by previous literature because of low frequency data used in previous studies

the political economy of fiscal deficits a survey this paper surveys recent literature both theoretical and empirical regarding political explanations for fiscal deficits political economy suggests conflicts of interest may lie behind the emergence of deficits 1 opportunistic politicians generate deficits to win elections even in conflict with general welfare 2 conflicts of interests between politicians partisan preferences create incentives for at least some incumbents to run deficits and 3 conflicts of interest between different social groups or regions generate tensions in the allocation of government resources leading to overspending this paper reviews these different strands of the literature it also covers contributions that highlight the crucial role of budget institutions in determining the extent to which the political motivations to generate deficits are indeed translated into poor fiscal outcomes promising avenues for future research are highlighted