Kenneth Rogoff's paper "Equilibrium Political Budget Cycles" analyzes how governments manipulate fiscal policy before elections to signal their competence to voters. The paper presents a model where voters and politicians are rational agents, and the political budget cycle arises due to information asymmetries about the incumbent's ability to manage public goods. The model shows that before elections, taxes are often cut and government spending is increased, leading to a consumption binge that is inefficient and reduces government investment. The paper argues that this cycle can be socially efficient as it helps voters assess the incumbent's competence. However, attempts to mitigate the cycle can be counterproductive, either by hindering information transmission or by forcing politicians to use more costly signaling methods. The paper also discusses various reforms, such as balanced-budget amendments and constitutional limits on tax and expenditure initiatives, and evaluates their effectiveness. It concludes that while political budget cycles are often seen as negative, they can serve a useful function in informing voters about the incumbent's competence. The paper also explores the implications of different electoral structures and the role of central bank independence in mitigating the cycle. Overall, the paper provides a comprehensive framework for understanding political budget cycles and their effects on economic policy and welfare.Kenneth Rogoff's paper "Equilibrium Political Budget Cycles" analyzes how governments manipulate fiscal policy before elections to signal their competence to voters. The paper presents a model where voters and politicians are rational agents, and the political budget cycle arises due to information asymmetries about the incumbent's ability to manage public goods. The model shows that before elections, taxes are often cut and government spending is increased, leading to a consumption binge that is inefficient and reduces government investment. The paper argues that this cycle can be socially efficient as it helps voters assess the incumbent's competence. However, attempts to mitigate the cycle can be counterproductive, either by hindering information transmission or by forcing politicians to use more costly signaling methods. The paper also discusses various reforms, such as balanced-budget amendments and constitutional limits on tax and expenditure initiatives, and evaluates their effectiveness. It concludes that while political budget cycles are often seen as negative, they can serve a useful function in informing voters about the incumbent's competence. The paper also explores the implications of different electoral structures and the role of central bank independence in mitigating the cycle. Overall, the paper provides a comprehensive framework for understanding political budget cycles and their effects on economic policy and welfare.