Budgets, expenditure composition and political manipulation

This paper analyses the presence of political cycles in Portuguese governments’ expenditures using monthly data over the period 1991-2013 for the main categories of government expenditures. The results indicate that Portuguese governments act opportunistically regarding the budget surplus and that they favour capital instead of current spending near to the elections. Moreover, right-wing governments are more prone to reduce expenditures and deficits after the elections than left-wing ones. A deeper disaggregated analysis of the components of government expenditures corroborates these findings while disentangles other relevant patterns of political manipulation in Portugal

Government Ideology and Economic Freedom

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Shades of red and blue: Government ideology and sustainable development

We study the effect of government ideology on sustainable development, measured as investment in genuine wealth, in a dynamic panel of 79 countries between 1981 and 2013. We find robust and statistically significant evidence that genuine investment grows faster under right-wing governments than under left-wing or center governments. In contrast, we find no indication of opportunistic cycles

The collapse of credit booms: A competing risks analysis

This paper analyses the collapse of credit booms by using a discrete-time competing risks duration model over a panel of 67 countries for the period 1975q1-2016q4 to disentangle the factors behind the length of benign and harmful credit booms. The results show that economic growth and monetary authorities play the major role in explaining the differences in the length and outcome of credit booms. While more growth contributes to longer booms that are more likely to land softly, higher interest rates and central bank independence cut credit booms short but make hard landings more likely. Moreover, we found that the longer a credit boom lasts the more likely it is to end in a systemic banking crisis. Although both types of credit expansions have an increasing probability of ending, as they grow older - exhibiting positive duration dependence - hard landing credit booms have proven to be statistically longer

Lockdowns, vaccines and the economy: how economic perceptions were shaped during the COVID-19 pandemic

This paper analyses the economic confidence indicators’ reaction to the environment surrounding the COVID-19 pandemic. Using Eurostat’s monthly data for the Economic Sentiment in European Union countries, we found that, in the COVID-19 era, confidence and perceptions about the economy are strongly dominated by factors related to the pandemic, more so by policy measures and the vaccination process than by the direct health impact of the coronavirus. This is found to be prevalent across the multiple dimensions of economic sentiment. Moreover, standard macroeconomic variables seem to play a smaller and more marginal role during this period. </p

What drives the duration of credit booms?

This paper presents a new perspective on the study of credit booms by both examining what determines their duration and testing for relevant political features. The results from the estimation of a discrete-time duration model show that both the economic and the political environment influence the duration of credit booms. These events are found to last longer when: (i) the economy is growing faster; (ii) levels of liquidity in the banking system are lower; (iii) current account position deteriorates; (iv) centre parties are in office; and (v) with coalitions/minority governments. Evidence of a political cycle in the duration of credit booms is also detected. Additionally, this study shows that credit booms that end up in banking crises last longer but this effect can be offset by a higher degree of Central Bank independence. Hence, a monetary authority that is not influenced by political pressures is essential to prevent the unfolding of credit booms into banking crises

Supplementary Information Files for 'Riding the wave of credit: Are longer expansions really a bad omen?'

Supplementary Information Files for 'Riding the wave of credit: Are longer expansions really a bad omen?'Abstract:Some studies argue that credit booms that end up in banking crises are usually longer than those that end without creating havoc. However, they do not test this hypothesis empirically. This paper employs a duration model to assess the relationship between the length of credit booms and their outcome. The empirical analysis shows that credit expansions that end in banking crisis are indeed more prone to last longer than those that end softly. Furthermore, differences in length patterns are found to start in the build-up phase, extending to the unwinding phase of credit cycles.</div

Government popularity in the UK during the COVID-19 pandemic

This paper analyses how government popularity was shaped in the UK during the COVID-19 pandemic. Using daily data for the Conservative party popularity rate, we find that their popularity was strongly dominated by factors related to the pandemic, more so by the political cases linked to its management and the measures that the government undertook than by the direct health impact of the coronavirus. The government stringency measures became more harmful for government popularity over time, especially when the pandemic metrics calmed down. The economy played a very marginal role in shaping government popularity during that period.</p

Political and institutional determinants of credit booms

The literature that investigates credit booms has essentially focused on their economic determinants. This paper explores the importance of political conditionings and central bank independence and provides some striking findings on this matter. Estimating a fixed effects logit model over a panel of developed and developing countries for the period 1975q1-2016q4, we find that credit booms are less likely when right-wing parties are in office, especially in developing countries, and when there is political instability. However, they have not proven to depend on the electoral cycle. More independent Central Banks are also found to reduce the probability of credit booms. Moreover, they seem to be more likely to occur and spread within a monetary union

Economic liberalization, political regimes and ideology

This paper assesses how economic freedom is affected by the ideological stance, being the first to analyse the role of dictatorial regimes and their ideological orientations. Using annual data for 145 countries over the period 2000-2017 and a two-step system GMM estimator, this study finds that democracies do promote more economic freedom than authoritarian regimes, but not in all circumstances The probability that economic liberalization is promoted is higher for right-wing dictatorships than for other autocracies and comparable to other types of democratic ruling, with the exception of right-wing democratic governments that strongly benefit liberalization. These rightwing governments, alongside with (the negative effect of) non right-wing dictatorships, seem to be the main contributors to explain why democracies in recent years are promoting more economic liberalization than autocracies. Additionally, our results suggest that democratic governments not ideologically identifiable seem to share a common dislike for policies that promote liberalizatio