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Political and Institutional Determinants of the Cyclicality of Fiscal Policy: Evidence from the OECD and Latin America

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Author Info
Nuno Venes

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Abstract

In this paper, we analyse the role of political and institutional variables on the cyclical patterns of central government expenditure and revenue. Working with a sample of 38 OECD and Latin-American countries in 1960-2003, we find that higher levels of income inequality are associated with stronger expenditure procyclicality, and that better institutions do not seem to mitigate this effect. IMF interventions are, in general, statistically insignificant in explaining the cyclical behaviour of expenditure, as well as the degree of development of financial systems. On the revenue side, income inequality leads to less procyclical policies. In general, political and institutional variables explain the cyclicality of government expenditure better than that of revenue.

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Publisher Info
Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number 2006/19.

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Date of creation: 2006
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Handle: RePEc:ise:isegwp:wp192006

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Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: http://www.iseg.utl.pt/departamentos/economia/

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Related research
Keywords: Fiscal policy; cyclicality; political and institutional determinants; OECD; Latin America;

Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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

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