Political business cycles in the European Union: PIIGS vs NON-PIIGS Countries

Abstract

. The objective of this work is to determine if there is empirical evidence of the existence of political business cycles in the European Union. For this, an econometric study has been carried out using a panel of data on fiscal balances, macroeconomic indicators and electoral dates for the countries that make up the EU-15 during the period 1995-2017. Our analysis, carried out using the fixed effects estimator and distinguishing between non- PIIGS and PIIGS countries, supports the hypothesis of political business cycles for the latter group of countries. The results show that for PIIGS countries the fiscal deficit of the year prior to the elections is greater than in the other years, holding constant some macroeconomic indicators.