IDEAS home Printed from https://ideas.repec.org/a/ipf/psejou/v49y2025i2p251-272.html
   My bibliography  Save this article

Governance quality vs. stimulus size: fiscal policy effectiveness during the COVID-19 pandemic

Author

Listed:
  • Mert Topcu

    (Alanya Alaaddin Keykubat University, Faculty of Economics, Administrative and Social Sciences, Department of Economics, Antalya, Türkiye)

  • Mustafa Alpin Gulsen

    (Alanya Alaaddin Keykubat University, Faculty of Economics, Administrative and Social Sciences, Department of Economics, Antalya, Türkiye)

Abstract

Given the importance of good governance for the efficiency of government spending, this study reveals the role of governance quality in fiscal policy effectiveness during the COVID-19 outbreak. Using cross-country threshold regressions for 144 countries, we find that a stringent lockdown policy (i) does not lead to economic downturn in countries with larger fiscal stimulus, (ii) leads countries with poor governance quality to head toward economic slowdown even with higher stimulus packages, (iii) does contribute to economic recovery even in countries with smaller fiscal packages if accompanied by higher governance quality. Overall, the results suggest that good governance helps achieve economic recovery, whereas an increase in the size of the fiscal stimulus can, at best, help protect against economic slowdown. The empirical findings have several implications for policymakers in countries where the blow hits the hardest, as well as for fiscal governance framework.

Suggested Citation

  • Mert Topcu & Mustafa Alpin Gulsen, 2025. "Governance quality vs. stimulus size: fiscal policy effectiveness during the COVID-19 pandemic," Public Sector Economics, Institute of Public Finance, vol. 49(2), pages 251-272.
    • Handle: RePEc:ipf:psejou:v:49:y:2025:i:2:p:251-272
    DOI: 10.3326/pse.49.2.4
    as

    Download full text from publisher

    File URL: http://pse-journal.hr/upload/files/pse/2025/2/Governance_quality_vs._stimulus_size_fiscal_policy_effectiveness_during.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.3326/pse.49.2.4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    fiscal stimulus; governance quality; COVID-19;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipf:psejou:v:49:y:2025:i:2:p:251-272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martina Fabris (email available below). General contact details of provider: https://edirc.repec.org/data/ijfffhr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.