The aim of this paper is to prove the occurrence of policy tools manipulation by incumbent politicians prior to an election, followed by the reverse policies after the elections are over, in a cyclical pattern. The paper studies the case of post-communist Romania. Our approach uses foreign currencies exchange rates as indicators of a change in the monetary mass, opposed to the price of gold as an indicator of the real economy. The interest rate for deposits is also analyzed through auto-regressive time series. Statistical analysis of data provides clear evidence of political intrusion in economy in Romania.
Table of Contents
1. INTRODUCTION
2. LITERATURE REVIEW
3. EMPIRICAL RESULTS FOR ROMANIA
3.1 Gold- the expression of the real economy
3.2. The U.S. Dollar and the Euro as political tools
3.3. The interest rate for deposits-Austrian theory put to empiric test
4. Conclusions and future work
Objective and Core Themes
This paper aims to provide empirical evidence for the existence of an opportunistic political business cycle in post-communist Romania between 1995 and 2012 by analyzing how incumbent politicians manipulate economic policy tools prior to elections.
- Analysis of foreign currency exchange rates (USD and Euro) as indicators of monetary mass manipulation.
- Examination of gold prices as a stable indicator of real economic welfare.
- Investigation of deposit interest rates to identify pre-election political influence.
- Application of ARIMA models to test for stationary time series and electoral impacts.
Excerpt from the Publication
3.2. The U.S. Dollar and the Euro as political tools
The strongest foreign currencies like U.S. Dollars, Euro, British Pounds and Swiss Francs are used as indicators of the domestic economy and their exchange rates are made widely available to the general public. Also, because people and companies are able to take credits in other currencies except the domestic one (RON), they are genuinely interested in the exchange rate at least on a monthly basis.
In these circumstances, it is natural that before elections politicians try to manipulate some of the foreign currency exchange rates through the change in the interest rate, in order to give the illusion of proficiency. Next, we study the exchange rates for U.S. dollars and the euro, in relation to the two dummy variables (politic_6 and politic_12).
The model proposed by SPSS 17 for USD after the series was made stationary by natural log is ARIMA(0,1,1) with the parameters from Table 4.
Summary of Chapters
1. INTRODUCTION: This chapter defines the political business cycle (PBC) and outlines the research objective to prove opportunistic economic manipulation by politicians in post-communist Romania.
2. LITERATURE REVIEW: The section traces the academic history of PBC models, from Nordhaus to rational partisan theories, providing the theoretical context for the study.
3. EMPIRICAL RESULTS FOR ROMANIA: This core section presents the methodology and statistical analysis using ARIMA models to examine gold prices, foreign exchange rates, and deposit interest rates.
3.1 Gold- the expression of the real economy: This chapter analyzes gold quotations to demonstrate that, unlike other economic indicators, the price of gold remains unaffected by pre-election political maneuvers.
3.2. The U.S. Dollar and the Euro as political tools: The chapter explores how fluctuations in exchange rates are utilized by politicians as instruments of artificial economic expansion prior to elections.
3.3. The interest rate for deposits-Austrian theory put to empiric test: This part examines how interest rates for deposits are adjusted as a strategic tool to attract funding for political campaigns.
4. Conclusions and future work: The chapter summarizes the findings, confirming the existence of opportunistic economic cycles in Romania and suggesting potential for future panel-data analysis.
Keywords
ARIMA models, deposit interest rate, foreign currency, political business cycle, Romania, opportunistic politicians, monetary mass, gold price, pre-election period, electoral cycles, rational opportunism, economic policy, exchange rate manipulation.
Frequently Asked Questions
What is the core subject of this research paper?
The paper investigates the existence of opportunistic political business cycles in post-communist Romania between 1995 and 2012.
What are the primary themes discussed in the study?
The study focuses on the manipulation of monetary policy instruments, foreign exchange rates, and deposit interest rates by incumbent politicians to influence voters.
What is the main research question?
The research seeks to prove whether incumbent politicians manipulate fiscal and monetary tools to simulate economic expansion prior to elections and subsequently cause contractions thereafter.
Which scientific methodology is employed?
The author uses statistical time series analysis, specifically Autoregressive Integrated Moving Average (ARIMA) models, to evaluate the stationarity of the variables and the impact of pre-election dummy variables.
What is covered in the main body of the paper?
The main body evaluates gold prices as a control variable and analyzes how USD, Euro, and deposit interest rates fluctuate significantly in correlation with the pre-election period.
Which keywords best characterize this work?
Key terms include ARIMA models, political business cycle, exchange rates, Romania, and opportunistic economic policy.
How does the author define the role of gold in the study?
Gold serves as a reliable indicator of the real economy because its price, unlike monetary mass or interest rates, is not subject to political manipulation for electoral gain.
What do the findings suggest regarding interest rates for deposits?
The data indicates a dramatic increase in interest rates during pre-election times, which serves as a strategy to attract capital for campaign financing.
- Quote paper
- Silvia Palasca (Author), 2013, Statistics of the Romanian Political Business Cyrcle, Munich, GRIN Verlag, https://www.grin.com/document/215748
