The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
We investigate whether private information about citizens' competence in political office can be revealed by their entry and campaign expenditure decisions. We find that this depends on whether voters and candidates have common or conflicting interests; only in the former case can entry be revealing. We apply these results to Rogoff's (1990) political budget cycle model: as interests are common, low-ability candidates are screened out at the entry stage, and so there is no signaling via fiscal policy. In a variant of Rogoff's model where citizens differ in honesty, interests are conflicting, so the political budget cycle can persist.