This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Procyclical Fiscal Policy: Shocks, Rules, and Institutions - A View From MARS

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Paolo Manasse

Additional information is available for the following registered author(s):

Abstract

This paper assesses the roles of shocks, rules, and institutions as possible sources of procyclicality in fiscal policy. By employing parametric and nonparametric techniques, I reach the following four main conclusions. First, policymakers' reactions to the business cycle is different depending on the state of the economy-fiscal policy is "acyclical" during economic bad times, while it is largely procyclical during good times. Second, fiscal rules and fiscal responsibility laws tend to reduce the deficit bias on average, and seem to enhance, rather than to weaken, countercyclical policy. However, the evidence also suggests that fiscal frameworks do not exert independent effects when the quality of institutions is accounted for. Third, strong institutions are associated to a lower deficit bias, but their effect on procyclicality is different in good and bad times, and it is subject to decreasing returns. Fourth, unlike developed countries, fiscal policy in developing countries is procyclical even during (moderate) recessions; in "good times," however, fiscal policy is actually more procyclical in developed economies.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.imf.org/external/pubs/ft/wp/2006/wp0627.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/27.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 41 pages
Date of creation: 06 Feb 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/27

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

This paper has been announced in the following NEP Reports: 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.:
  1. Zvi Hercowitz & Michel Strawczynski, 2004. "Cyclical Ratcheting in Government Spending: Evidence from the OECD," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 353-361, 01. [Downloadable!] (restricted)
  2. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Schmitt-Grohé, Stephanie & Uribe, Martín, 2004. "Optimal Simple and Implementable Monetary and Fiscal Rules," CEPR Discussion Papers 4334, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Fabrizio Balassone & Maura Francese, 2004. "Cyclical asymmetry in fiscal policy, debt accumulation and the Treaty of Maastricht," Temi di discussione (Economic working papers) 531, Bank of Italy, Economic Research Department. [Downloadable!]
  5. Fatas, Antonio & Mihov, Ilian, 2001. "Government size and automatic stabilizers: international and intranational evidence," Journal of International Economics, Elsevier, vol. 55(1), pages 3-28, October. [Downloadable!] (restricted)
    Other versions:
  6. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD, Economics Department. [Downloadable!]
  7. Aaron Tornell & Philip R. Lane, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March. [Downloadable!] (restricted)
  8. Paolo Manasse & Nouriel Roubini, 2005. "'Rules of Thumb' for Sovereign Debt Crises," International Finance 0509003, EconWPA. [Downloadable!]
    Other versions:
  9. Paolo Manasse, 2005. "Deficit Limits, Budget Rules and Fiscal Policy," IMF Working Papers 05/120, International Monetary Fund. [Downloadable!]
    Other versions:
  10. Tanner, Evan, 2004. "Fiscal rules and countercyclical policy: Frank Ramsey meets Gramm-Rudman-Hollings," Journal of Policy Modeling, Elsevier, vol. 26(6), pages 719-731, September. [Downloadable!] (restricted)
    Other versions:
  11. Henning Bohn, 1998. "The Behavior Of U.S. Public Debt And Deficits," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 949-963, August. [Downloadable!] (restricted)
  12. Philippine Cour-Thimann & Pablo Hernandez Cos & Matthias F. Mohr & Mika Tujula & Carine Bouthevillain & Geert Langenus & Sandro Momigliano & Gerrit Van Den Dool, 2001. "Cyclically adjusted budget balances: an alternative approach," Working Paper Series 077, European Central Bank. [Downloadable!]
    Other versions:
  13. Xavier Debrun & Oya Celasun & Jonathan David Ostry, 2006. "Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries: A "Fan-Chart" Approach," IMF Working Papers 06/67, International Monetary Fund. [Downloadable!]
  14. Alessandra Casella, 1999. "Tradable deficit permits:efficient implementation of the Stability Pact in the European Monetary Union," Economic Policy, CEPR, CES, MSH, vol. 14(29), pages 321-362, October. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Ignacio Lozano & Jorge Toro, 2007. "Fiscal Policy Throughout the Cycle: The Colombian Experience," BORRADORES DE ECONOMIA 002730, BANCO DE LA REPÚBLICA. [Downloadable!]
  2. Ignacio Lozano & Jorge Toro, . "Fiscal Policy Throughout the Cycle: The Colombian Experience," Borradores de Economia 434, Banco de la Republica de Colombia. [Downloadable!]
  3. Roberto Golinelli & Sandro Momigliano, 2006. "Real-time determinants of fiscal policies in the euro area: Fiscal rules, cyclical conditions and elections," Temi di discussione (Economic working papers) 609, Bank of Italy, Economic Research Department. [Downloadable!]
  4. Ugo Panizza & Dany Jaimovich, 2007. "Procyclicality or Reverse Causality?," RES Working Papers 4508, Inter-American Development Bank, Research Department. [Downloadable!]
  5. G. C. Lim & Paul D. McNelis, 2006. "Fiscal and Current Account Balances in a Model with Sticky Prices and Distortionary Taxes," Melbourne Institute Working Paper Series wp2006n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  6. George Kopits, 2007. "Fiscal Responsibility Framework: International Experience and Implications for Hungary," MNB Occasional Papers 2007/62, Magyar Nemzeti Bank (The Central Bank of Hungary). [Downloadable!]
  7. 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. [Downloadable!] (restricted)
  8. Enrique Alberola & José M. Montero, 2006. "Debt sustainability and procyclical fical policies in Latin America," Banco de España Working Papers 0611, Banco de España. [Downloadable!]
  9. Ugo Panizza & Dany Jaimovich, 2007. "Prociclicalidad o Causalidad Reversa?," RES Working Papers 4509, Inter-American Development Bank, Research Department. [Downloadable!]
  10. Giorgio Di Giorgio & Salvatore Nistic�, . "Fiscal Deficits, Current Account Dynamics and Monetary Policy," Working Papers 8, Department of the Treasury, Ministry of the Economy and of Finance. [Downloadable!]
Statistics
Access and download statistics

Did you know? Cannot find something on IDEAS? Encourage the publisher to index it! Instructions.

This page was last updated on 2009-11-20.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.