Ciclos políticos del presupuesto bajo reglas fiscales subnacionales

Abstract

Political Budget Cycles (PBCs) refer to spending increases, tax cuts or increases in the deficit that occur before elections, as ruling authorities attempt to manipulate economic variables for electoral advantages. One factor that can affect the occurrence of PBCs is the existence of fiscal rules. This study aims to investigate whether subnational fiscal rules have mitigated the political budget cycle in Colombian municipalities from 1993 to 2009. Using a database with information from 1034 municipalities, I estimate different dynamic panel models using the Generalized Method of Moments, examining different categories of municipal spending and investment. The evidence suggests the existence of PBCs in the studied fiscal variables, though the cycles have different magnitudes for in- vestment and government spending. Notably, subnational fiscal rules have successfully smoothed the identified cycles, thereby contributing to achieving better public finances at the territorial level.