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The cyclical behaviour of fiscal policy: evidence from the OECD

  • Lane, Philip R.

This paper addresses the topic of cyclicality in fiscal policy. In particular, we show that the level of cyclicality varies across spending categories and across OECD countries. In line with leading theories of fiscal cyclicality, we show that countries with volatile output and dispersed political power are the most likely to run procyclical fiscal policies. Wage government consumption is highlighted as the most important channel by which these variables affect fiscal cyclicality

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 87 (2003)
Issue (Month): 12 (December)
Pages: 2661-2675

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Handle: RePEc:eee:pubeco:v:87:y:2003:i:12:p:2661-2675
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Adriana Arreaza & Bent E. Sorensen & Oved Yosha, 1998. "Consumption Smoothing through Fiscal Policy in OECD and EU Countries," NBER Working Papers 6372, National Bureau of Economic Research, Inc.
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  3. Barry J. Eichengreen & Tamim Bayoumi, 1994. "Restraining Yourself; Fiscal Rules and Stabilization," IMF Working Papers 94/82, International Monetary Fund.
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  6. 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.
  7. Lane, P.R. & Tornell, A., 1998. "Why Aren't Savings Rates in Latin America Procyclical?," Papers 642, Harvard - Institute for International Development.
  8. Hercowitz, Z. & Strawczynski, M., 1999. "Cyclical Bias in Government Spending: Evidence from the OECD," Papers 6-99, Tel Aviv.
  9. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  10. Ernesto Stein & Ernesto Talvi & Alejandro Grisanti, 1999. "Institutional Arrangements and Fiscal Performance: The Latin American Experience," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 103-134 National Bureau of Economic Research, Inc.
  11. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  12. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  13. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-85, May.
  14. Aart Kray & Jaume Ventura, 2001. "Comparative advantage and the cross-section of business cycles," Economics Working Papers 845, Department of Economics and Business, Universitat Pompeu Fabra.
  15. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
  16. Gali, Jordi, 1994. "Government size and macroeconomic stability," European Economic Review, Elsevier, vol. 38(1), pages 117-132, January.
  17. Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858, March.
  18. Tornell, Aaron & Lane, Philip R., 1998. "Are windfalls a curse?: A non-representative agent model of the current account," Journal of International Economics, Elsevier, vol. 44(1), pages 83-112, February.
  19. Svensson, J, 1996. "Collusion Among Interest Groups : Foreign Aid and Rent-Dissipation," Papers 610, Stockholm - International Economic Studies.
  20. Michael Gavin & Ricardo Hausmann & Roberto Perotti & Ernesto Talvi, 1996. "Managing Fiscal Policy in Latin America and the Caribbean: Volatility, Procyclicality, and Limited Creditworthiness," Research Department Publications 4032, Inter-American Development Bank, Research Department.
  21. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
  22. Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers 7499, National Bureau of Economic Research, Inc.
  23. Aart Kraay & Jaume Ventura, 2007. "Comparative Advantage and the Cross-section of Business Cycles," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1300-1333, December.
  24. Tamim Bayoumi & Barry Eichengreen, 1995. "Restraining Yourself: The Implications of Fiscal Rules for Economic Stabilization," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 32-48, March.
  25. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
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