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The Cyclicality of Fiscal Policy in the Middle East and Central Asia:Is the Current Crisis Different?

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  • International Monetary Fund
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    Abstract

    The countries of the Middle East and North Africa, and the Caucasus and Central Asia have the highest output volatility in the world. Fiscal policy is a powerful tool that can help dampen the business cycles. This paper analyzes the cyclical properties of fiscal policy in the region during the past four decades and explores whether the response during the current global economic crisis is different in 2009. Across a sample of 28 countries, we find that fiscal policy has typically amplified the business cycles and that it has been more procyclical in good times than in bad times. However, the response to the current crisis has differed from the past in that about half of the countries responded countercyclically in 2009. Going forward, the fiscal space during downturns varies widely across countries, depending on the level of debt, access to capital markets, and natural resource wealth. Not surprisingly, the oil exporters have more fiscal room than oil importers, although there are some oil importers that still have room to respond countercyclically in bad times.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/68.

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    Length: 26
    Date of creation: 01 Mar 2010
    Date of revision:
    Handle: RePEc:imf:imfwpa:10/68

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    Related research

    Keywords: Global Financial Crisis 2008-2009; Middle East and Central Asia; Oil exporting countries; Oil prices; Oil revenues; Oil sector; Regional shocks; fiscal policy; government spending; fiscal space; public debt; fiscal policy response; fiscal impulse; fiscal expansions; expansionary fiscal policy; expansionary fiscal; expenditure; fiscal stimulus; fiscal multipliers; tax rates; fiscal expansion; fiscal balance; expenditures; fiscal contractions; fiscal stance; tax revenues; public finances; fiscal indicators; public expenditures; fiscal outcomes; primary deficit; fiscal affairs department; fiscal affairs; public spending; fiscal activities; fiscal deficit; composition of public spending; fiscal policy instruments; fiscal policy formulation; discretionary fiscal policy; fiscal vulnerabilities; fiscal responsibility; fiscal balances; tax base; primary fiscal balance; tax bases; fiscal profligacy; fiscal policy outcomes; fiscal institutions; fiscal responsibility laws; government expenditures; fiscal sustainability; fiscal stimulus package; fiscal operations; fiscal adjustments; national budget; aggregate demand; fiscal policies; quasi-fiscal activities; fiscal impulses; fiscal spending;

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    References

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    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.:
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    1. 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.
    2. Alberto Alesina & Guido Tabellini, 2005. "Why is Fiscal Policy Often Procyclical?," NBER Working Papers 11600, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Sergey Vlasov, 2011. "Russian Fiscal Framework Past, Present and Future.Do we Need a Change?," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(64), pages 35-81, October -.
    2. Serhan Cevik, 2011. "Policy Coordination in Fiscal Federalism," IMF Working Papers 11/147, International Monetary Fund.
    3. Baldi, Guido, 2013. "Fiscal Policy Institutions and Economic Transition in North Africa," MPRA Paper 48677, University Library of Munich, Germany.

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