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Abstract

The fiscal and budgetary policy should play a key role to alleviate the impact of the business cycle on the real economy. Procyclical fiscal policy is particularly undesirable in developing countries, as it not only exacerbates the business cycle, but also the high output volatility hurts the poorest people with low safety net. This paper assesses the structural budget deficit in Romania during 2000- 2009 and evaluates the role of the fiscal policy during the business cycle. The paper concludes that the fiscal policy in Romania was highly procyclical, exacerbating the economic cycle. In order to escape from this procyclicality, Romania needs deep structural reforms in order to restore the sustainability of the public finances and put Romania on a sustainable growth path.

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File URL: http://www.dofin.ase.ro/carfib/wpaefr/wpaefr_50.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB in its series Advances in Economic and Financial Research - DOFIN Working Paper Series with number 50.

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Date of creation: Aug 2011
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Handle: RePEc:cab:wpaefr:50

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Related research

Keywords: structural budget balance; procyclicality of fiscal policy; fiscal discipline;

Other versions of this item:

Find related papers by JEL classification:

• E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
• H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
• H6 - Public Economics - - National Budget, Deficit, and Debt

This paper has been announced in the following NEP Reports:

• NEP-ALL-2011-12-19 (All new papers)
• NEP-MAC-2011-12-19 (Macroeconomics)
• NEP-TRA-2011-12-19 (Transition Economics)

References

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Cited by:

1. Daianu, Daniel & Kallai, Ella & Lungu, Laurian, 2012. "Tax Policy under the Curse of Low Revenues: The Case of Romania (Part I)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 156-186, March.
2. Daianu, Daniel & Kallai, Ella & Lungu, Laurian, 2012. "Tax Policy under the Curse of Low Revenues: The Case of Romania (Part II)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 143-162, June.

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