Electoral political business cycles in Turkey

Abstract

There is an extensive empirical literature testing Political Business Cycles hypothesis for major developed countries. This study differs from those ones at three points. Firstly, this paper is one of the first empirical studies testing Electoral Political Business Cycles in Turkey that is a developing country with developing markets and institutions. Secondly, the data set includes all the important economic policy instruments and indicators, especially the paper uses of extensive budget terms. Finally, the literature studies uses annually or quarterly data, but this paper uses monthly data. The empirical results provide significant evidence of expansionary fiscal and monetary policies prior to elections, leading to a significant increase in output growth. Moreover, pre-election expansionary policies result as higher inflation after elections. Thus, the empirical results suggest that like some of the developed countries Turkey has Electoral Political Business Cycles.