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

Author

Listed:
  • 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)

Abstract

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).

Suggested Citation

  • Stefano Battilossi & Regina Escario & James Foreman-Peck, 2013. "Fiscal policy response to cycles under two regimes: Spain 1950–1998," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 7(3), pages 267-294, September.
  • Handle: RePEc:afc:cliome:v:7:y:2013:i:3:p:267-294
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    File URL: http://dx.doi.org/10.1007/s11698-012-0089-4
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    Keywords

    Fiscal policy; Business cycle; Regime change;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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