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Discretion and Cyclicality in Irish Budgetary Management 1969-2003

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  • Colin Hunt

    (Trinity College Dublin)

Abstract

This paper addresses the topic of cyclicality and discretion in Irish fiscal policy. In particular, we show that the level and nature of cyclicality varies across different expenditure components and we introduce a new definition of feasible discretion to take account of political imperatives in budgetary management. We find that overall government expenditure is acyclical and is most heavily influenced by a fiscal parsimony objective. Automatic stabilisers are efficiently counter-cyclical, feasible discretionary government consumption growth is orthogonal to economic fundamentals while feasible discretionary investment growth is strongly pro-cyclical. Using official growth forecasts, we show that feasible discretionary investment growth is deliberately pro-cyclical.

Suggested Citation

  • Colin Hunt, 2005. "Discretion and Cyclicality in Irish Budgetary Management 1969-2003," The Economic and Social Review, Economic and Social Studies, vol. 36(3), pages 295-321.
  • Handle: RePEc:eso:journl:v:36:y:2005:i:3:p:295-321
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    File URL: http://www.esr.ie/Vol36_3/06_Hunt_Article.pdf
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    References listed on IDEAS

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