Vote Buying or (Political) Business (Cycles) as Usual?

IEB Working Paper N. 2015/23

53 Pages Posted: 24 Oct 2015

See all articles by Toke Skovsgaard Aidt

Toke Skovsgaard Aidt

University of Cambridge - Faculty of Economics and Politics

Zareh Asatryan

ZEW – Leibniz Centre for European Economic Research; University of Freiburg

Lusine Badalyan

University of Bremen

Friedrich Heinemann

ZEW – Leibniz Centre for European Economic Research; University of Heidelberg - Alfred Weber Institute for Economics

Multiple version iconThere are 3 versions of this paper

Date Written: October 6, 2015

Abstract

We study the short-run effect of elections on monetary aggregates in a sample of 85 low and middle income democracies (1975-2009). We find an increase in the growth rate of M1 during election months of about one tenth of a standard deviation. A similar effect can neither be detected in established OECD democracies nor in other months. The effect is larger in democracies with many poor and uneducated voters, and in Sub-Saharan Africa, Latin America, and in East-Asia and the Pacific. We argue that the election month monetary expansion is related to systemic vote buying which requires significant amounts of cash to be disbursed right before elections. The finely timed increase in M1 is consistent with this; is inconsistent with a monetary cycle aimed at creating an election time boom; and it cannot be, fully, accounted for by alternative explanations.

Keywords: Political business cycles, vote buying, monetary economics

JEL Classification: D72, E51, O10

Suggested Citation

Aidt, Toke Skovsgaard and Asatryan, Zareh and Badalyan, Lusine and Heinemann, Friedrich, Vote Buying or (Political) Business (Cycles) as Usual? (October 6, 2015). IEB Working Paper N. 2015/23, Available at SSRN: https://ssrn.com/abstract=2678923 or http://dx.doi.org/10.2139/ssrn.2678923

Toke Skovsgaard Aidt

University of Cambridge - Faculty of Economics and Politics ( email )

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Zareh Asatryan (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

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University of Freiburg ( email )

Albert-Ludwigs-Universität Freiburg, Wirtscha.inf.
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Germany

Lusine Badalyan

University of Bremen ( email )

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Bremen, D-28334
Germany

Friedrich Heinemann

ZEW – Leibniz Centre for European Economic Research ( email )

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Germany

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University of Heidelberg - Alfred Weber Institute for Economics ( email )

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