Are Fiscal Rules Mitigating the Political Budget Cycle? – Case of Albania
Are Fiscal Rules Mitigating the Political Budget Cycle? – Case of Albania

Author(s): Desantila Muja, Arjan Tushaj
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Political budget cycles; Fiscal policy; Fiscal rules
Summary/Abstract: Theoretical and empirical background highlighted the effectiveness of fiscal rules related to their types and institutional strategies through the implementation of state fiscal standards. Effective fiscal policy requires countercyclical actions to sustain policy outcomes. The paper examines the impact of fiscal rules on the political budget cycles, particularly in developing countries like Albania. The adoption of weak fiscal rules has caused the political budget cycle despite other determinants through using data related to the Albanian case. Empirical studies showed that strong fiscal rules produced budgetary discipline and reduced political budget cycles. The qualitative and quantitative effects of appropriate fiscal rules should facilitate the adherence to European Union fiscal standards necessary for accessing the European Union. Albania shall adopt and adhere to the European Union’s fiscal rules upon its accession to the European Union. This full context should be considered by fiscal policymakers, free from distortions caused by political pressure.

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