Political business cycles: Evidence from Taiwan, Japan, and South Korea using panel data approach

This paper uses a panel vector autoregressive model to examine the existence of political business cycles across Taiwan, Japan, and South Korea over the 1988 to 2008 period. The empirical results indicate that the electoral dummy variable has a significantly positive impact on the government expenditures. The government expenditures in the election year and the previous year of election are significantly increased. There is evidence supporting the political business cycles across Taiwan, Japan, and South Korea. Therefore, reducing public debts caused by the candidates´ election promises may be a way to improve the situation of government fiscal worsening.