Electoral Cycles: Do they really fit the Data?

This paper provides a theoretical model of pre-electoral budget cycle and tests its empirical implications. Whenelections approach, incumbent policy-makers have an incentive to signal their competency by acting on economicvariables. Rational voters incorporate the knowledge of such mechanisms in their decisions, evaluatinggovernments on the basis of unexpected policy.Available data confirms the hypothesis that economies are manipulated during election years, but voters do not seem tobehave as predicted. Alteration of fiscal variables may be due to an attempt on the incumbent's part at influencingeconomic growth performance as opposed to an experiment in direct signalling .