ACTIVITY OF ECONOMIC POLICY CREATORS AND CREDIBILITY OF POLICIES
Keywords:
political budget cycle, fiscal policy, credibility of economic policy, competent government, time inconsistencyAbstract
Political structures that create economic policies in a given country have, at their disposal, many resources for realizing their economic and often political goals. Often times certain economic or political measures coincide with election cycles in that country. By redistributing national income through fiscal policy,governments can achieve their short-term political goals, which is especially pronounced in the pre-election period. The competence of economic policy makers in this regard, attracts increasing attention among economists who pay special attention to this issue. Certainly, governments around the world, in order secure wins in elections or re-elections, resort to significant measures in order to present themselves to the public or their voters as competent. In that sense, the behavior of the government in the pre-election period and under the assumption of rational voter behavior, is subordinated exclusively to the success of the elections, with economic measures adequate to that goal. Accordingly, the essay states precisely which government can be considered a competent government and what is the economic policy of a competent government.
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