Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-Cyclical?

Contents:

Author Info

  • Balazs Egert

Abstract

This paper analyses the reaction of fiscal policy to the cycle in OECD countries. The results suggest that while overall government balances were counter-cyclical in the past and more so in economic downturns than in upswings, discretionary fiscal policy was neutral on average. However, discretionary fiscal policy appears to react to the cycle in a non-linear fashion: fiscal policy in countries with high public debt and high government deficits tends to be pro-cyclical, while countries that have low public debt and that have surpluses are more likely to conduct a counter-cyclical fiscal policy. The paper also finds that asset prices have a significant impact on government balances.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-03/cesifo1_wp3777.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3777.

as in new window
Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:ces:ceswps:_3777

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: fiscal policy; pro-cyclicality; counter-cyclicality; OECD countries;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dreher, Axel & Lamla, Michael J. & Lein, Sarah M. & Somogyi, Frank, 2009. "The impact of political leaders' profession and education on reforms," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 169-193, March.
  2. Roel Beetsma & Massimo Giuliodori, 2010. "Fiscal adjustment to cyclical developments in the OECD: an empirical analysis based on real-time data," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 419-441, July.
  3. N. Gregory Mankiw, 1986. "Government Purchases and Real Interest Rates," NBER Working Papers 2009, National Bureau of Economic Research, Inc.
  4. Jacopo Cimadomo, 2012. "Fiscal Policy in Real Time," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 114(2), pages 440-465, 06.
  5. Zsolt Darvas, 2009. "The Impact of the Crisis on Budget Policy in Central and Eastern Europe," IEHAS Discussion Papers, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 0924, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  6. Everts, Martin, 2006. "Duration of Business Cycles," MPRA Paper 1219, University Library of Munich, Germany.
  7. Alberto Alesina & Guido Tabellini, 2005. "Why is fiscal policy often procyclical?," Levine's Bibliography 784828000000000465, UCLA Department of Economics.
  8. Bernoth, Kerstin & Hughes Hallett, Andrew & Lewis, John, 2008. "Did Fiscal Policy Makers Know What They Were Doing? Reassessing Fiscal Policy with Real Time Data," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6758, C.E.P.R. Discussion Papers.
  9. Ugo Panizza & Dany Jaimovich, 2007. "Procyclicality or Reverse Causality?," IDB Publications 6843, Inter-American Development Bank.
  10. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number bry_71-1.
  11. Galí, Jordi & Perotti, Roberto, 2003. "Fiscal Policy and Monetary Integration in Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3933, C.E.P.R. Discussion Papers.
  12. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, Elsevier, vol. 79(2), pages 145-152, May.
  13. Sven Jari Stehn & Daniel Leigh, 2009. "Fiscal and Monetary Policy During Downturns," IMF Working Papers, International Monetary Fund 09/50, International Monetary Fund.
  14. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, Elsevier, vol. 93(2), pages 345-368, December.
  15. Strawczynski, Michel & Zeira, Joseph, 2009. "Cyclicality of Fiscal Policy: Permanent and Transitory Shocks," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7271, C.E.P.R. Discussion Papers.
  16. César Calderón & Roberto Duncan & Klaus Schmidt-Hebbel, 2004. "Institutions and Cyclical Properties of Macroeconomic Policies," Working Papers Central Bank of Chile, Central Bank of Chile 285, Central Bank of Chile.
  17. Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, National Bureau of Economic Research, Inc, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1 National Bureau of Economic Research, Inc.
  18. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 53-78, July.
  19. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers, Centre for Economic Performance, LSE dp0007, Centre for Economic Performance, LSE.
  20. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
  21. Marco Buti & Paul Noord, 2004. "Fiscal Discretion and Elections in the Early Years of EMU," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(4), pages 737-756, November.
  22. Sanvi Avouyi-Dovi & Julien Matheron, 2005. "Interactions between business cycles, financial cycles and monetary policy: stylised facts," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 273-98 Bank for International Settlements.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Balazs Egert, 2012. "Bringing French Public Debt Down: The Options for Fiscal Consolidation," CESifo Working Paper Series, CESifo Group Munich 3928, CESifo Group Munich.
  2. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers, OECD Publishing 932, OECD Publishing.
  3. Rossana Merola & Douglas Sutherland, 2013. "Fiscal Consolidation and the Implications of Social Spending for Long-Term Fiscal Sustainability," Review of Economics and Institutions, Università di Perugia, Università di Perugia, vol. 4(3).
  4. Åsa Johansson & Yvan Guillemette & Fabrice Murtin & David Turner & Giuseppe Nicoletti & Christine de la Maisonneuve & Guillaume Bousquet & Francesca Spinelli, 2012. "Looking to 2060: Long-Term Global Growth Prospects: A Going for Growth Report," OECD Economic Policy Papers, OECD Publishing 3, OECD Publishing.
  5. Margit Molnár, 2012. "Fiscal consolidation: What factors determine the success of consolidation efforts?," OECD Journal: Economic Studies, OECD Publishing, OECD Publishing, vol. 2012(1), pages 123-149.
  6. Christopher Reicher, 2013. "A set of estimated fiscal rules for a cross-section of countries: Stabilization and consolidation through which instruments?," Kiel Working Papers, Kiel Institute for the World Economy 1850, Kiel Institute for the World Economy.
  7. Truong Nguyen, 2013. "Estimating India's Fiscal Reaction Function," ASARC Working Papers, The Australian National University, Australia South Asia Research Centre 2013-05, The Australian National University, Australia South Asia Research Centre.
  8. Martin Plödt & Claire Reicher, 2014. "Estimating simple fiscal policy reaction functions for the euro area countries," Kiel Working Papers, Kiel Institute for the World Economy 1899, Kiel Institute for the World Economy.
  9. Reicher, Claire, 2014. "Systematic fiscal policy and macroeconomic performance: A critical overview of the literature," Economics Discussion Papers, Kiel Institute for the World Economy 2014-29, Kiel Institute for the World Economy.
  10. David Turner & Francesca Spinelli, 2013. "The Effect of Government Debt, External Debt and their Interaction on OECD Interest Rates," OECD Economics Department Working Papers, OECD Publishing 1103, OECD Publishing.
  11. Douglas Sutherland & Peter Hoeller, 2012. "Debt and Macroeconomic Stability: An Overview of the Literature and Some Empirics," OECD Economics Department Working Papers, OECD Publishing 1006, OECD Publishing.
  12. Douglas Sutherland & Peter Hoeller & Rossana Merola & Volker Ziemann, 2012. "Debt and Macroeconomic Stability," OECD Economics Department Working Papers, OECD Publishing 1003, OECD Publishing.
  13. Cerón, Juan A., 2012. "La respuesta de la política fiscal a la actividad económica en los países desarrollados/Fiscal policy reaction to economic activity in developed countries," Estudios de Economía Aplicada, Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 369 (32 pag, Abril.
  14. Vito Tanzi, 2011. "The Return to Fiscal Rectitude After the Recent Escapade," Rivista di Politica Economica, SIPI Spa, SIPI Spa, issue 3, pages 253-277, JULY-SEPT.
  15. Margit Molnar, 2012. "Fiscal Consolidation: Part 5. What Factors Determine the Success of Consolidation Efforts?," OECD Economics Department Working Papers, OECD Publishing 936, OECD Publishing.
  16. Rossana Merola & Douglas Sutherland, 2012. "Fiscal Consolidation: Part 3. Long-Run Projections and Fiscal Gap Calculations," OECD Economics Department Working Papers, OECD Publishing 934, OECD Publishing.
  17. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: How Much, How Fast and by What Means?," OECD Economic Policy Papers, OECD Publishing 1, OECD Publishing.
  18. Romain Bouis & Ane Kathrine Christensen & Boris Cournède, 2013. "Deleveraging: Challenges, Progress and Policies," OECD Economics Department Working Papers, OECD Publishing 1077, OECD Publishing.
  19. Daniel Kaffine & Graham A. Davis, 2013. "A simple Monte Carlo approach to examine sample robustness in growth regressions," Working Papers, Colorado School of Mines, Division of Economics and Business 2013-04, Colorado School of Mines, Division of Economics and Business.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3777. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.