Populist leaders and the political budget cycle

Abstract

The rise of populist leaders has been a notable trend in recent years, not just in developing democracies but in developed ones as well. The phenomenon has attracted wide scholarly interest, studying the effect of populist leaders on various fields of life, including the economy. This paper sheds light on an additional aspect of populist leaders' actions: their utilization of the political budget cycle (PBC). The PBC is a well-known hypothesis claiming the existence of an economic cycle which revolves around national elections, caused by leaders who manipulate the economy to create favourable conditions towards re-election. Although the existence of PBCs has been empirically established, particularly in developing democracies, its link to populism remains to be empirically explored. In this paper we claim that populist leaders make an increased use of the PBC in comparison to other leaders. We substantiate this hypothesis through a comprehensive statistical analysis utilizing a recently released dataset encompassing decades of populist leaders. Our findings reveal robust empirical support for the hypothesis. We find that populist leaders play a major role in driving political budget cycles across different democratic systems, with particularly strong effects in weaker democracies. These findings carry significant implications given the rising prevalence of populist leaders.