Political institutions and fiscal policy: evidence from post-communist Europe

Abstract

Do political factors have any effect on fiscal policy and public spending in the post-communist Europe? We answer this question by using annual data for 15 Central and Eastern European democracies from 1992-2017. We look into several political variables: number of parties in the cabinet, partisan cycle (ideology), electoral cycle, and coalition type. We deploy fixed-effect estimates, showing that the peculiarities of a country explain a large part of the variance, thus validating the path dependency and incrementalism theses in public policy analysis. We find positive impact of the pre-electoral and electoral year on public spending, but no statistically significant support for other poitical determinats.