Francisco José Veiga

University of Minho · Núcleo de Investigação em Políticas Económicas (NIPE)

While most economists agree that seigniorage is one way governments finance deficits, there is less agreement about the political, institutional and economic reasons for relying on it. This paper investigates the main political and institutional determinants of seigniorage using panel data on about 100 countries, for the period 1960–1999. Estimates...

The present article tests predictions of rational political business cycle models using a large and previously unexplored data set of Portuguese municipalities. This data allows for a clean test of these predictions due to the high level of detail on expenditure items, an exogenous fixed election schedule, and homogeneity of Portuguese local govern...

The purpose of this paper is to empirically determine the effects of political instability on economic growth. By using the system-GMM estimator for linear dynamic panel data models on a sample covering up to 169 countries, and 5-year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth ra...

This paper examines the role of institutions in the nexus between public spending and economic growth. Empirical results based on a newly assembled dataset of 80 countries over the 1970-2010 period suggest that particularly when institutions prompt governments to be accountable to the general citizen does public capital spending promote growth. Tak...

This paper analyzes how electoral incentives shape fiscal policy, focusing on the introduction of mayoral term limits in Portugal. Applying a difference-in-differences approach, we find evidence that when a municipality has a term-limited (TL) mayor, it experiences a fall in revenues and expenditures. The effect seems to be driven by lower effort o...

We model the political manipulation of deficits in a political budget cycle model. Assuming that a share of voters suffers from debt illusion the incumbent can increase her re-election chances by expanding government spending. However, the optimal manipulation may exceed the amount necessary to maximize re-election chances (over-manipulation) if th...

This paper empirically evaluates the importance of institutions and political stability for productivity growth. We explore this relation in a novel way by evaluating the impact of political and institutional variables on the structural change and within-sector components of labor productivity growth. Our results do not provide robust evidence that...

This article aims to evaluate the impact of budget forecast manipulations on election results using a sample that covers all 308 Portuguese municipalities over the period running from 1998 to 2017. The results reveal that incumbent mayors overestimate revenues and expenditures. Overstating the budget more on the revenue side, they end up with a def...

A moral hazard model is used to show why overly optimistic revenue forecasts prior to elections can be optimal: Opportunistic governments can increase spending and appear more competent; ex post deficits emerge in election years, thereby producing political forecast cycles – as also found for US states in the empirical literature. Additionally, we...

The purpose of this study is to empirically examine the key determinants of elite rivalry and identify their main channels of transmission, contributing to the sparse literature on the topic. Our results show that income level, human capital and the system of checks and balances are strong positive determinants of elite rivalry, while natural resou...

The objective of this paper is to study the influence of institutional quality on the human capital accumulation process. This paper builds on prior theoretical developments which establish a micro-foundation link between human capital accumulation and institutional quality. Using a panel data series from 1960 to 2010, we observe that political ins...

In the literature, it has been suggested that political budget cycles are context-conditional, i.e., do not occur in all countries or under all circumstances. What about the underlying economic conditions? It has already has been shown that recessionary expectations reinforce the political budget cycle. This paper argues theoretically that opportun...

Political budget cycles (PBCs) have been well documented in the literature, albeit not for all circumstances. Similarly, there is clear evidence on the positive effect of economic growth on electoral success. However, no work has been done on the impact of economic growth on the magnitude of PBCs. The theoretical model argues that a government has...

Government transparency has been discussed both as a way to decrease informational asymmetries between officeholders and citizens and as part of what makes for procedurally fair governance. These two different lines of argument generate predictions about how transparency should change voters’ reactions to economic and policy outcomes. First, under...

This paper provides a unique comparison between French and Portuguese local governments with respect to the nature and determinants of budget forecast errors. It starts by documenting and comparing their statistical properties. The results point at biased and inefficient budget forecasts, which seem to have been more cautious in French departments...

This article presents a dataset that combines several time series of economic variables for Portugal, from 1969 to 2015, which can be used to accurately measure the change in value of different series in the fisheries sector. Raw data includes total nominal revenue from fish landings measured in thousands of euros, a consumer price index, and the n...

Interpretation of fisheries data can be considerably affected by missing or naïve analyses of economic variables. We analyze the case of Portugal, showing how considering the effects of inflation reverses previous conclusions regarding the evolution of fish prices and revenues (fisheries performance). We further emphasize the importance of variable...

This paper evaluates the accuracy of price and wage forecasts made under the scope of the Greek, Portuguese and Irish Economic Adjustment Programmes (EAPs). Besides comparing the quality of forecasts for the three EAPs, it checks if they were less accurate than forecasts for other euro area countries, and compares the European Commission’s forecast...

Quantos presidentes de câmara e de junta de freguesia não puderam recandidatar-se nas eleições autárquicas de 2013? Que perfil tinham esses autarcas? Quais foram os distritos e partidos com um maior número de políticos impedidos de se recandidatar? Que impacto teve a limitação dos mandatos nas finanças municipais? E na participação eleitoral? E o q...

This paper examines the effects of elections on the conduct of central governments' fiscal policies. To do so, it uses a unique panel database that includes disaggregated spending and revenue series at the central government level for multiple countries over the 1975–2010 period. Examining political environments under which incumbent governments ge...

This paper analyzes the effects of voter turnout on the vote shares received by the incumbent government. A system of simultaneous equations is estimated using a panel dataset of 278 Portuguese municipalities, for the period 1979-2005, covering 10 legislative elections. The results indicate that right-wing governments have lower vote shares when tu...

Neste artigo é efetuada uma análise dos programas de Cooperação Territorial Europeia (CTE), nomeadamente, na sua dimensão cultural, assim como da sua aplicação em Portugal nos dois últimos períodos de programação. Com o intuito de analisar o financiamento da cultura em Portugal através dos programas CTE, é efetuado um levantamento dos projetos da á...

This paper analyzes the effects of government size and of the composition of public expenditure on economic development. Using the system-GMM estimator for linear dynamic panel data models, on a sample covering up to 156 countries and 5-year periods from 1980 to 2010, we find that government size as a percentage of GDP has a quadratic (inverted U-s...

Using a panel data set covering 139 countries over the 1970 - 2009 period, we empirically investigate the role of foreign direct investment on growth through diffusion of technology and innovation. Using an otherwise standard growth regression and regressions on productivity growth, we introduce a direct effect of foreign direct investment, which m...

This paper analyzes the impact of economic performance on voter turnout. We estimate an economic turnout model in which local economic variables are included in quadratic form, so that non-linear effects can be taken into account. We use panel datasets covering municipalities, from 1979 to 2005, and cross-sections of parishes (freguesias) to analyz...

This paper simultaneously analyses the determinants of intergovernmental fiscal transfers and the votes that these transfers earn in subsequent legislative elections in Portugal. Results suggest that election year increases in transfers by the central government to municipalities secure added votes, and that these transfers are targeted at jurisdic...

This paper analyses the impact of economic conditions on Portuguese municipal electoral outcomes. We use two extensive datasets to estimate an economic voting model which accounts for the possibility that different levels of government have different levels of responsibility for economic outcomes and for clarity of government responsibility. The em...

This zipped file contains the datasets (annual and 5-year periods data) and the do- and log-files for the descriptive statistics (Table 1) of Aisen and Veiga (2013, EJPE).

This paper presents the emergy evaluation of the Portuguese economy for the years 2000, 2005 and 2009. The main objective is to provide comprehensive emergy indicators which seek to incorporate the environmental dimension into well-known macroeconomic indicators of the Portuguese economy. Attention is given to emergy measures of national intensity...

The literature on the rational PBC suggests that politicians systematically manipulate economic and fiscal conditions before elections to increase their chances of reelection. Most tests of this theory look for evidence of pre-election distortions in fiscal policy. We propose a new test that explores the two-way interaction between the magnitude of...

Using data for 278 Portuguese mainland municipalities, we estimate the impact of national and local economic conditions on legislative electoral outcomes over the period from the reestablishment of democracy in 1974 to the present. Empirical results indicate that the performance of the national economy is important but that the municipal situation...

El propósito de este artículo es estimar los efectos de la inestabilidad política sobre el crecimiento económico. Utilizando métodos de estimación convencionales con datos de 169 países para períodos quinquenales entre 1960 y 2004, encontramos que altos grados de inestabilidad política están asociados a tasas más bajas de crecimiento del PBI per cá...

This paper is an empirical analysis of the likelihood of failure of inflation stabilization programs. Random effects logit models are estimated on a dataset of 39 programs implemented in 10 countries, in order to determine which economic and political variables affect the probability of failure of stabilizations. This study's main contribution is t...

The purpose of this paper is to empirically analyze the effects of political instability, social polarization and the quality of institutions on inflation volatility over time and across countries. Using the system-GMM estimator for linear dynamic panel data models on a sample covering 160 countries, analyzed in the period from 1960 to 1999, this p...

We provide evidence that the composition of foreign capital, measured by the ratio foreign direct investment over total liabilities, a.ects growth directly and through the speed of convergence. Developing countries benefit relatively more as their initial GDP is smaller. The dataset comprises the period 1970-2004 and 96 countries, and the results a...

THis zipped file contains the dataset (in Stata format) of Aisen and Veiga (2008, JDE).

In Portugal, increases in investment expenditures and changes in the composition of spending favouring highly visible items are associated with higher vote percentages for incumbent mayors seeking re-election. The political payoff to opportunistic spending increased after democracy became well-established in the country.

The literature on political business cycles suggests that politicians systematically manipulate economic conditions before elections. The literature on vote and popu-larity functions suggests that economic conditions systematically aect election out-comes. This paper integrates these two strands of literature. We use Rogo (1990)'s model of the rati...

Economists generally accept the proposition that high and volatile inflation rates generate inefficiencies that reduce societys welfare. Furthermore, studies have shown that inflation is harmful to economic growth. However, determining the causes of the worldwide diversity of inflationary experiences is an important challenge not yet satisfactorily...

When the automobile was developed near the beginning of the last century, it was the relatively new fuel gasoline, not the familiar ethanol that became the fuel of choice. We examine the intersections of the early development of the automobile and the petroleum industry and consider the state of the agriculture sector during the same period. Throug...

Economists generally accept the proposition that high inflation rates generate inefficiencies that reduce society's welfare and economic growth. However, determining the causes of the worldwide diversity of inflationary experiences is an important challenge not yet satisfactorily confronted by the profession. Based on a dataset covering around 100...

Using employment data for Portuguese municipalities, we find strong evidence of political business cycles. Employment increases shortly before elections mainly in municipalities where the mayor's party has a majority of deputies in the municipal assembly and where she is running for reelection.

Abstract We extend the Thomas (1985) dynamic optimizing model of money demand and currency substitution to the case in which the individual has restricted or no access to foreign currency denominated bonds. In this case currency substitution decisions and asset substitution decisions are not separable. The results obtained suggest that the signific...

The purpose of this paper is to empirically analyze the effects of political instability, social polarization and the quality of institutions on inflation volatility over time and across countries. Using the system-GMM estimator for linear dynamic panel data models on a sample covering 160 countries, analyzed in the period from 1960 to 1999, this p...

O presente artigo testa a existência de ciclos político-económicos nos municípios de Portugal Continental, durante o período 1979-2001. Os resultados empíricos revelam claramente o comportamento eleitoralista dos autarcas que, em anos de eleições, aumentam os défices e as despesas municipais, fazendo crescer o emprego municipal. Ao nível das despes...

This paper analyzes the effects of International Monetary Fund (IMF) arrangements on the timing of inflation stabilization programs. By providing financial support that may allow the reduction of inflation without incurring politically unacceptable economic costs, the IMF can hasten stabilization. But, since support can also reduce the costs of inf...

While most economists agree that seigniorage is one way governments finance deficits, there is less agreement about the political, institutional, and economic reasons for relying on it. This paper investigates the main determinants of seigniorage using panel data on about 100 countries, for the period 1960-1999. Estimates show that greater politica...

I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called "collusive-seeming" equilibria disappear.

This article analyzes the effects of the timing of elections on the timing and character of adopted inflation stabilization plans. Multinomial logit estimations show that before elections exchange rate-based stabilizations are more likely to be implemented than money-based stabilizations, while the opposite is more likely after elections.

This paper analyzes the popularity of the main political entities in Portugal. Estimation results of popularity functions validate the responsibility hypothesis, with unemployment, and to a lesser extent inflation, affecting popularity levels. There is also evidence of personality effects, of popularity erosion over consecutive terms and of honeymo...

This paper offers new insights on the interactions between economics and politics in Portugal. We use two unexplored data sets consisting of monthly polls on vote intentions for the main political parties in Portugal and responses to a consumer survey containing a battery of questions on economic evaluations. The analysis covers the interval from 1...

The present article tests predictions of rational political business cycle models using a large and previously unexplored data set of Portuguese municipalities. This data allows for a clean test of these predictions due to the high level of detail on expenditure items, an exogenous fixed election schedule, and homogeneity of Portuguese local govern...

This paper is an empirical analysis of the likelihood of failure of inflation stabilization programs. Logit models are estimated on a dataset of 39 programs implemented in 10 countries since the late 1950s, in order to determine which economic and political variables affect the probability of failure of stabilizations. Besides the well-known effect...

O presente artigo analisa o impacto da economia na popularidade dos governantes e nas intenções de voto dos portugueses. Os resultados das estimações realizadas revelam que: (1) os eleitores portugueses responsabilizam os governantes pela evolução da economia, em particular pelo desemprego; (2) os governos de direita são mais responsabilizados que...

Economists generally accept the proposition that high and volatile inflation rates generate inefficiencies that reduce society’s welfare. Furthermore, studies have shown that inflation is harmful to economic growth. However, determining the causes of the worldwide diversity of inflationary experiences is an important challenge not yet satisfactoril...

This paper analyses the effects of International Monetary Fund (IMF) arrangements on the timing of inflation stabilization programs. Essentially, we test the hypothesis that IMF aid accelerates stabilization using probit and proportional hazards models. As in theoretical models, results are mixed: larger withdrawals of the amounts agreed to seem to...

This paper offers additional insights on the interactions between economics and politics in Portugal. We use an unexplored data set consisting of monthly polls on vote intentions for the main political parties in Portugal, since 1986. Results indicate that: (1) socialist governments had less electoral support than social democratic governments; (2)...

In some new political economic models, delays of stabilizations result from coordination problems caused by collective choice-making mechanisms. Although several previous studies have tested the effects of political instability and fragmentation on seigniorage, deficits, or inflation, no direct tests of the influence of these factors on the delays...

The paper analyses the political and economic determinants of the Portuguese political entities' popularity, following Veiga (1998), the only published study on popularity functions for Portugal. After a description of the recent evolution and structure of the Portuguese political system, popularity functions are estimated for the Assembly, Governm...