Political budget cycles in sub-Saharan Africa: new empirical evidence

Abstract

This article re-examines political budget cycles in sub-Saharan Africa. It first examines the effect of elections on fiscal policy according to the rational opportunistic hypothesis. The study then analyses the strength of these effects. Ordinary least squares, fixed effects, random effects and generalised method of moment in system are applied on a sample of 41 countries from 1990 to 2015. Our results suggest that the lead-up to and holding of elections in sub-Saharan Africa lead to increasing government spending, declining tax revenues and worsening fiscal deficits. We also find that democracy and fighting corruption significantly reduce the strength of political budget cycles, while ethnic fragmentation has reverse effects. We recommend improving the quality of institutions that control public action in order to tame political budget cycles in sub-Saharan Africa.