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Mr. Antonio David and Can Sever
We examine electoral cycles in tax reforms using monthly data over the period of 1990-2018 for 22 advanced economies and emerging markets. We show that governments tend to avoid announcing tax reforms during the months running up to elections. In addition, they become more likely to announce those reforms in the first few months following elections, indicating that “political capital” plays a role in the timing of reforms. These patterns are broad-based regarding the changes in tax base and rate, and for various types of taxes. We also find that the pre-election decrease in the likelihood of tax reform announcements is stronger in emerging markets, and weaker in the countries with relatively better institutional quality. Finally, our results indicate that neither fiscal rules nor IMF programs appear to have differential effects on electoral cycles in tax reforms.
Mr. Antonio David and Can Sever

of tax reforms and elections Figure 2: Probability of tax reforms around elections (percent) Figure 3: Change in the probability of tax reforms (in pp) around elections Figure 4: Change in the probability of tax reforms (in pp) around elections, 12-month windows Figure 5: ROC curve Figure 6: Different tax measures Figure 7: Different tax types TABLES Table 1: Main results Table 2: Robustness Table 3: The role of other factors Table A.1: Elections in the sample Table A.2: The number of observations with reforms in each tax measure and type

Mr. Ari Aisen
In response to high and chronic inflation, countries have adopted different stabilization policies. However, the extent to which these stabilization programs were designed for political motives is not clear. Since exchange-rate-based stabilizations (ERBS) create an initial consumption boom followed by a contraction, whereas money-based stabilizations (MBS) generate a consumption bust followed by a recovery, policymakers may consider the timing of elections when determining the nominal anchor for stabilization. This paper finds strong evidence that the choice of nominal anchor depends on elections, implying the existence of political opportunism. ERBS are, on average, launched before elections while MBS are set after them.
Mr. Sanjeev Gupta, Miss Estelle X Liu, and Mr. Carlos Mulas-Granados
This paper explores the impact of political and institutional variables on public investment. Working with a sample of 80 presidential and parliamentary democracies between 1975 and 2012, we find that the rate of growth of public investment is higher at the beginning of electoral cycles and decelerates thereafter. The peak in public investment growth occurs between 21 and 25 months before elections. Cabinet ideology and government fragmentation influence the size of investment booms. More parties in government are associated with smaller increases in public investment while left-wing cabinets are associated with higher sustained increases in investment. Stronger institutions help attenuate the impact of elections on investment, but available information is insufficient to draw definitive conclusions.
International Monetary Fund. Research Dept.
Vol. 54, No. 2 includes three notable contributions from the Seventh Jacques Polak Annual Research Conference (ARC) hosted by the IMF in November 2006. Its lead paper, by Olivier Blanchard of Harvard University, is the 2006 Mundell-Fleming Lecture (delivered at the ARC), which analyzes current-account deficits in the advanced economies. Other papers in this issue look at the relationship between international financial integration and the real economy. Other papers discuss whether (or not): i) the next capital account crisis can be predicted; ii) accepted definitions of debt crises are adequate; iii) the Doha Round of trade talks (if they are ever successfully completed) will lead to preference erosion; and finally iv) there is room for political opportunism in countries deciding between money-based or exchange-rate-based stabilization programs.

probability, using the benchmark model previously estimated. Figure 5 shows how the probability of an ERBS increases as the distance to the next elections shrinks. The figure starts from the highest value of distance to next election in the sample (Nicaragua), holding the other variables in the regression to their sample means. According to Figure 5 , the probability of adopting an ERBS ranges from 76 to 100 percent, depending how close next elections are. Figure 5. Predicted Probabilities with Varying Distance (Months to Next Elections) Sources: Various

Mr. Ari Aisen

distance to the next elections shrinks. The picture starts from the highest value of distance to next elections in the sample (Nicaragua) holding the other variables in the regression to their sample means. According to Figure 5 , the probability of adopting an ERBS ranges from 76 percent to 100 percent depending how close next elections are. Figure 5: Predicted Probabilities with Varying Distance (Months to Next Elections)* * Reserves, openness, political fragmentation, and growth are evaluated at their means Distance (Months to Next Elections) Figure 6

Mr. Sanjeev Gupta, Miss Estelle X Liu, and Mr. Carlos Mulas-Granados

the Electoral College mechanically implements the outcome of a popular vote. Fourth, each election in the sample should be generally regarded as being sufficiently competitive, meaning that there is a real possibility of change in government. Two major criteria apply in this aspect: a) there were no significant concerns before elections that elections will not be free and fair; b) there were no allegations by Western monitors, if any, of significant vote-fraud. For example, although elections in Mexico never resulted in a change of government before 2000, since

Mr. Antonio David and Can Sever

coordination problem by influencing the timing of reforms. Appendix Table A.1. Elections in the sample Australia Czechia Germany Japan Poland UK 3/1990 6/1990 12/1990 2/1990 10/1991 4/1992 3/1993 6/1992 10/1994 7/1993 9/1993 5/1997 3/1996 6/1996 9/1998 10/1996 9/1997 6/2001 10/1998 6/1998 9/2002 6/2000 9/2001 5/2005 11/2001 6/2002 9/2005 11/2003 9/2005 5/2010 10/2004 6/2006 9/2009 9/2005 10/2007 5/2015 11/2007 5/2010 9/2013 8

Mr. Christian H Ebeke

at a predetermined time, and 0 otherwise. The variable ELEENDO i,t equals 1 in country i and year t if an election whose timing was not predetermined took place, and 0 otherwise. The postelection indicators were coded accordingly. Among the 191 elections in the sample, 56.5 percent are classified as predetermined. 14 The baseline regressions are reestimated with the new election indicators. If the baseline results are robust, they should also hold for predetermined elections. The revised model takes the following form: Y i , t = α i + Σ p = 0 2 φ p E L E P