**Table 1.** _Descriptive statistics, and fixed effects and dynamic panel system GMM regression results.  Dependant variable: Annual budget balance as a percentage of GDP, 1989-2004_<sup>_a_</sup>

|Descriptive Statistics and|(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|(9)|
|---|---|---|---|---|---|---|---|---|---|
|<br>Estimators→<br>_Variables_↓|Means<br>(Std. Dev.)|Fixed<br>Effects|System<br>GMM|System<br>GMM|System<br>GMM|System<br>GMM|System<br>GMM|System<br>GMM|System<br>GMM|
|||-0.392|2.584†|3.266†|1.378|4.885*|2.167|1.859|2.053|
|Constant||(1.443)|(1.524)|(1.855)|(1.442)|(2.397)|(1.600)|(2.154)|(2.166)|
||-2.061|0.703**|0.912**|0.916**|0.896**|0.813**|0.925**|0.895**|0.910**|
|_Budget Balanceit-1_|(4.314)|(0.158)|(0.144)|(0.136)|(0.155)|(0.156)|(0.156)|(0.147)|(0.142)|
||4.937|1.244|0.973†|0.930†|1.079*|1.047*|1.013*|0.988*|0.969*|
|_Ratingit+1_|(3.094)|(0.795)|(0.512)|(0.487)|(0.499)|(0.445)|(0.511)|(0.509)|(0.498)|
||4.989|-1.344*|-1.645**|-1.624**|-1.634**|-1.348**|-1.630**|-1.634**|-1.644**|
|_Ratingit_|(3.018)|(0.674)|(0.634)|(0.639)|(0.658)|(0.478)|(0.617)|(0.621)|(0.631)|
||5.099|0.184|0.011|-0.014|0.177|-0.291|0.012|-0.011|0.023|
|_Ratingit-1_|(2.925)|(0.260)|(0.306)|(0.277)|(0.257)|(0.319)|(0.281)|(0.280)|(0.301)|
||0.241|-0.230|-0.261|-0.158|-0.461|0.040|-0.228|-0.342|-0.265|
|_Electionit+1_|(0.429)|(0.976)|(1.085)|(0.877)|(0.843)|(0.678)|(1.103)|(1.181)|(1.028)|
||0.227|-1.308|-2.536*|-2.293*|-2.614*|-1.737†|-2.712**|-2.654*|-2.552*|
|_Electionit_|(0.420)|(1.302)|(1.313)|(1.126)|(1.307)|(0.993)|(1.025)|(1.156)|(1.060)|
||0.206|-0.041|-1.085|-0.928|-1.117|-0.971|-1.022|-1.063|-1.089|
|_Electionit-1_|(0.406)|(1.135)|(0.998)|(0.888)|(0.976)|(0.953)|(0.994)|(1.056)|(0.961)|
||1.154|0.009|0.090|0.073|0.093|0.013|0.087|0.098|0.093|
|_Rating*Electio_nit+1|(2.539)|(0.169)|(0.164)|(0.140)|(0.127)|(0.102)|(0.163)|(0.178)|(0.154)|
||1.094|0.251|0.535*|0.495*|0.503*|0.382*|0.562*|0.543*|0.538**|
|_Rating*Electionit_|(2.516)|(0.230)|(0.226)|(0.225)|(0.251)|(0.196)|(0.218)|(0.230)|(0.218)|
||1.041|0.067|0.297†|0.274†|0.277†|0.263†|0.288†|0.299†|0.298†|
|_Rating*Electionit-1_|(2.479)|(0.168)|(0.158)|(0.157)|(0.167)|(0.154)|(0.156)|(0.161)|(0.158)|
|_Unemploymentit-1_|9.912<br>(5.696)|||-0.042<br>(0.076)||||||
|_Inflationit-1_|1.014<br>(4.129)||||-0.032<br>(0.065)|||||
||5.164|||||-0.540*||||
|_Reservesit-1_|(2.358)|||||(0.233)||||
|_Curr Crisisit-1_|0.191<br>(0.395)||||||0.810<br>(0.893)|||
|_Rightsit-1_|-2.770<br>(1.073)|||||||-0.271<br>(0.518)||
||3567||||||||0136|
|_Checksit-1_|.<br>(1.306)||||||||.<br>(0.531)|
|_Country/Year Dummies_||Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|
|Instruments Generated|||71|86|86|86|72|72|72|
|Hansenχ<sup>_2_</sup>Test|||0.00|0.00|0.00|0.00|0.00|0.00|0.00|
|Arellano-Bond AR(2)_Z_Test|||-1.52|-1.49|-1.59|-1.63†|-1.57|-1.52|-1.56|
|_N_|141|141|141|141|141|141|141|141|141|
|Waldχ<sup>2</sup>(_R_<sup>_2_</sup>)||(0.749)|162.59**|207.56**|2077.83**|8406.03**|47.42**|658.10**|302..99**|

> aSample means and standard deviations are reported in Column 1. Coefficient estimates and robust standard errors are reported in Columns 2-9. Lagged _Budget Balance_ , all _Election_ , all _Rating_ , _Unemploymen_ t, _Inflation_ and _Reserves_ terms are treated as endogenous while _Curr Crisis_ , _Rights_ and _Checks_ are treated as exogenous in system GMM estimations in Columns 3-9. We do not report but obtain consistent results when treating _Curr Crisis_ , _Rights_ and _Checks_ terms as endogenous.  Significance: † p < 0.10, * p < 0.05, ** p < 0.01.

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