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Fiscal policy response to cycles under two regimes: Spain 1950–1998

Listed author(s):
  • Stefano Battilossi

    ()

    (Department of Economic History and Institutions, Universidad Carlos III de Madrid, Madrid, Spain)

  • Regina Escario

    ()

    (Department of Applied Economics, Universidad de Zaragoza, Zaragoza, Spain)

  • James Foreman-Peck

    ()

    (Cardiff Business School, Cardiff University, Cardiff, UK)

In the second half of the 20th century, Spain provides a case of political regime change, which according to some political economy models should also lead to a shift in the cyclical nature of fiscal policy. We find that in most of the pre-democratic era, there was a strong procyclical bias to fiscal policy. Eradication began in the last years of the autocratic regime under the influence of fiscal institutional reform and perhaps learning. It was completed after the transition to democracy when countercyclical fiscal policy was reinforced in the late 1980s by membership of the European Exchange Rate Mechanism. This experience, established by two separate econometric identification procedures, as well as a narrative drawing especially upon OECD and EIU reports, runs counter to the predictions of the political economy models of Lane (J Public Econ 87(12):2661–2675, 2003) and Alesina et al. (J Eur Econ Assoc 5:1006–1036, 2008).

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File URL: http://dx.doi.org/10.1007/s11698-012-0089-4
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Article provided by Association Française de Cliométrie (AFC) in its journal Cliometrica, Journal of Historical Economics and Econometric History.

Volume (Year): 7 (2013)
Issue (Month): 3 (September)
Pages: 267-294

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Handle: RePEc:afc:cliome:v:7:y:2013:i:3:p:267-294
Contact details of provider: Web page: http://www.cliometrie.org

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