We present a model of political budget cycles in which incumbents influence voters by targeting government spending to specific groups of voters at the expense of other voters or other expenditures. Each voter faces a signal extraction problem: being targeted with expenditure before the election...

We present a model of the political budget cycle in which incumbents try to influence voters by changing the composition of government spending, rather than overall spending or revenues. Rational voters may support an incumbent who targets them with spending before the election even though such...

The plan of this report is the following. In the next section we present a conceptual background, reviewing the basic opportunistic political business cycle, the problems with monetary theories, and the theory and evidence supporting the existence of a political fiscal cycle. In section 3, we...