Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-cyclical?
AbstractThis 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.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2012-12.
Length: 43 pages
Date of creation: 2012
Date of revision:
Fiscal policy; pro-cyclicality; counter-cyclicality; OECD countries;
Other versions of this item:
- Balázs Égert, 2010. "Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-cyclical?," OECD Economics Department Working Papers 763, OECD Publishing.
- Balazs Egert, 2012. "Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-Cyclical?," CESifo Working Paper Series 3777, CESifo Group Munich.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
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