Forthcoming. ‘Credit Rating Agencies and Elections in New Democracies: Guardians of Fiscal Discipline? Economics Letters (with P. Vaaler).
Abstract: Credit rating agencies (CRAs) have drawn criticism for failing to anticipate and deter root causes of the 2008-2009 financial crisis in the US. On the other hand, we present evidence that CRAs regularly anticipate and deter governments in new democracies from opportunistic borrowing and potential financial crises related to elections and the political budget cycle behavior they encourage. In a sample of 18 such countries holding 32 presidential elections from 1989-2004, we show that CRAs induce greater fiscal discipline during election periods when governments have incentives to borrow opportunistically for short-term electoral gain. Countries with higher CRA sovereign ratings borrow less than lower-rated countries in election periods, but borrow more in non-election periods. CRAs promote fiscal discipline during increasingly frequent election periods in new democracies.
Forthcoming. ‘Popularity, Polarisation, and Political Budget Cycles’, Public Choice (with D. Magleby).
Abstract: A vast literature has established that governments may abuse policy instruments in order to enhance their popularity and thus their probability of re-election, resulting in political budget cycles. Yet do popular governments have the same incentives to boost their popularity through pre-electoral expansions as unpopular governments? The existing empirical evidence, which to this date is entirely country-specific, produces mixed messages. Some studies find a simple linear relationship between popularity and the magnitude of political budget cycles and some find a non-linear relationship, peaking at the point where the race for office is tight. This article presents a simple theoretical model, which suggests that party polarisation may be the key mediator reconciling these alternative findings.
2012. ‘Mooted Signals: Economic Disturbances and Political Budget Cycles', Journal of Applied Economics 15(2)189-212.
Abstract: Governments can finance fiscal expansions with debt to appear competent and boost their electoral prospects, resulting in a political budget cycle. This article shows that economic disturbances blur competence signals, dampening political budget cycles. Economic disturbances can be construed at the aggregate level as economic volatility which is a consequence of decisions taken by diverse economic actors. The more actors that are not elected at the national level have an impact on economic performance, the more difficult it will be for voters to disentangle government-specific competence shocks. Fiscal decentralisation increases policy leverage of governing bodies that are not elected at the national level; economic openness affects the number of foreign economic actors that cannot be held locally accountable. These two factors therefore limit voters' ability to disentangle individual shocks to government competence, dampening strategic borrowing. The predictions receive empirical support from a time series-cross section analysis between 1980 and 2008.
2012. ‘Coalition Incentives for Political Budget Cycles’, Public Choice 151(1-2)121-136.
Abstract: The literature on political budget cycles, i.e. fluctuations in the budget balance during elections, largely assumes governments to be unitary actors. However, in many political systems, political parties share governing responsibility in a coalition. This article examines the intra-coalition dynamics that underlie budget negotiations. A formal model disentangles the individual coalition partners’ incentives for pre-electoral deficits. It shows that coalition partners favour higher deficits when they have a larger share in power and when they have broad appeal. Parties that are pivotal in coalition negotiations prefer a smaller pre-electoral deficit.
Under review. ‘Promises, Promises: Vote-Buying, Institutionalized Political Parties and Political Budget Cycles’ (with P. Keefer).
Abstract: This paper advances and tests a novel explanation for both vote-buying and political budget cycles.  The former occurs because politicians cannot make credible commitments to voters regarding future policies and, instead, use pre-electoral transfers to mobilize electoral support.  Such transfers trigger political budget cycles:  they are often large in the aggregate, underwritten by  government resources, and are rationally concentrated in the period just before elections are held.  We use three proxies for the ability of politicians to make credible commitments to voters:  the average age of all parties and the age of the government party at the time the current leader took office; and average country responses to a World Values Survey question asking about respondents’ confidence in political parties.  Using any of these variables, political budget cycles are significantly larger in countries where politicians are less able to make credible commitments.