## Political Business Cycles and Expenditure Policies in Developing Countries

_IMF Working Papers, October 1, 1994_

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**Canonical URL:** [Political Business Cycles and Expenditure Policies in Developing Countries](https://www.imf.org/en/publications/wp/issues/2016/12/30/political-business-cycles-and-expenditure-policies-in-developing-countries-1253)

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## Bibliographic details
- Authors: Ludger Schuknecht
- Published: October 1, 1994
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451854312.001

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### Summary of findings
- Study covers fiscal policies around elections in 35 developing countries.
- Governments attempt to improve reelection prospects using expansionary expenditure policies.
- Rising fiscal deficits before elections are followed by fiscal consolidation afterwards.
- Fiscal cycles are particularly evident in countries that are less trade-oriented or that pursue fixed exchange rate policies.
- Certain IMF-supported programs (SAF/ESAF and EFF arrangements) contribute to fiscal stabilization, but they do not appear to affect the incidence of fiscal cycles.
- Conclusion: policy advice and macroeconomic projections should not overlook election constraints; political feasibility of reforms should be strengthened particularly before elections.

### Empirical patterns and scope
- Sample: 35 developing countries.
- Observable pattern: pre-election expansionary expenditures → post-election fiscal consolidation.
- Amplifying factors: lower trade orientation; fixed exchange rate regimes.

### Role of IMF programs
- Programs identified: SAF/ESAF and EFF arrangements.
- Effect: contribute to fiscal stabilization.
- Limitation: do not appear to change the incidence of election-related fiscal cycles.

### Policy implications and recommendations
- Incorporate election constraints into policy advice and macroeconomic projections.
- Strengthen the political feasibility of reforms before elections to improve reform durability and reduce opportunistic fiscal expansions.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/political-business-cycles-and-expenditure-policies-in-developing-countries-1253_