This paper deals with the fiscal behaviour of governments in the 1920s and 1930s. The intention is to see whether there were the same features in government behaviour as in the post-World War II era. In particular, attention is paid to asymmetric fiscal policies, ie the question of whether government deficits react differently to income growth and inflation during depressions and booms. The analysis is carried out using data primarily from the League of Nations. The data come from 32 countries and covers the period 1925?1938. Estimation results suggest the in pre-war period deficits were much less sensitive to output and did not show as many asymmetric features as in post-war period. Otherwise, the same regularities apply to the empirical results. In particular, this is true with the disciplinary role of government debt in terms of budget deficits.
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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number
402.
Length: Date of creation: 08 Nov 2006 Date of revision: Handle: RePEc:fer:dpaper:402
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Find related papers by JEL classification: E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
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