Some Cross-Country Evidence about Debt, Deficits and the Behaviour of Monetary and Fiscal Authorities
AbstractThis paper assesses how monetary authorities behave and how they interact. Pooled data for the 15 members of the European Union except Luxembourg and five other OECD countries serves to answer these questions. Three basic conclusions emerge. First, fiscal policy responds to the ratio of public debt to output in a stabilizing manner. Second, coordinated macroeconomic policy exists: easy fiscal policy leads to tight monetary policy, and easy monetary policy to tight fiscal policy. Third, both monetary and fiscal policy respond to the cycle in a stabilizing manner, but automatic stabilization through fiscal policy is much weaker than generally perceived. Expansion raises tax receipts but also government expenditures. The destabilizing response on the expenditure side is also extremely marked.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1653.
Date of creation: May 1997
Date of revision:
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Find related papers by JEL classification:
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
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