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Fiscal rules and fiscal counter-cyclicality

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  • Jalles, João Tovar

Abstract

We assess the effect of fiscal rules on a new time-varying measure of fiscal counter-cyclicality computed for 60 countries over the period 1980–2014. First, we find that fiscal counter-cyclicality is positive and has been increasing over time, being larger in advanced economies. Second, we find that fiscal rules reduce the degree of fiscal counter-cyclicality. The result is especially strong for debt-based rules in advanced economies. Some design features hinder the degree of fiscal counter-cyclicality (such as escape clauses or enforcement procedures), while others (such as transparency) foster it.

Suggested Citation

  • Jalles, João Tovar, 2018. "Fiscal rules and fiscal counter-cyclicality," Economics Letters, Elsevier, vol. 170(C), pages 159-162.
    • Handle: RePEc:eee:ecolet:v:170:y:2018:i:c:p:159-162
    DOI: 10.1016/j.econlet.2018.06.020
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    Cited by:

    1. Brändle, Thomas & Elsener, Marc, 2023. "Do fiscal rules matter? A survey on recent evidence," Working papers 2023/07, Faculty of Business and Economics - University of Basel.
    2. Lim, Jamus Jerome, 2020. "The political economy of fiscal procyclicality," European Journal of Political Economy, Elsevier, vol. 65(C).
    3. Yuchen Lin & Daxin Dong & Jiaxin Wang, 2021. "The Negative Impact of Uncertainty on R&D Investment: International Evidence," Sustainability, MDPI, vol. 13(5), pages 1-21, March.
    4. Afonso, António & Carvalho, Francisco Tiago, 2022. "Time-varying cyclicality of fiscal policy: The case of the Euro area," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    5. António Afonso & Francisco Tiago Carvalho, 2021. "Euro area time-varying cyclicality of fiscal policy," Working Papers REM 2021/0202, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    6. Ryota Nakatani, 2019. "A Possible Approach to Fiscal Rules in Small Islands — Incorporating Natural Disasters and Climate Change," IMF Working Papers 2019/186, International Monetary Fund.
    7. Ryota Nakatani, 2021. "Fiscal Rules for Natural Disaster- and Climate Change-Prone Small States," Sustainability, MDPI, vol. 13(6), pages 1-26, March.
    8. Ringa Raudla & James W. Douglas, 2021. "Structural Budget Balance as a Fiscal Rule in the European Union—Good, Bad, or Ugly?," Public Budgeting & Finance, Wiley Blackwell, vol. 41(1), pages 121-141, March.
    9. Chrysanthakopoulos, Christos & Tagkalakis, Athanasios, 2023. "Fiscal rules and tax policy cyclicality," Economics Letters, Elsevier, vol. 225(C).

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    More about this item

    Keywords

    Fiscal rules; Weighted least squares; Time-varying coefficients; Fiscal stabilization; Government size; Filtering;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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