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Fiscal Episodes and Market Power

Author

Listed:
  • António Afonso

    (ISEG/University of Lisbon – University of Lisbon
    UECE – Research Unit on Complexity and Economics)

  • João Tovar Jalles

    (UECE – Research Unit on Complexity and Economics
    Nova School of Business and Economics)

Abstract

We assess the effect of fiscal episodes, as determined via alternative approaches, on GDP and on markups in a panel of 14 OECD countries. Our results with narrative action-based data show counter-cyclicality since negative fiscal shocks increase markups. Additional empirical exercises reveal that spending-based consolidation programs have a more counter-cyclical effect on the behaviour of markups over the short and medium term than tax-based ones. Moreover, in times of economic contraction the degree of counter-cyclicality of negative (positive) government spending (tax) shocks is larger than during economic expansions.

Suggested Citation

  • António Afonso & João Tovar Jalles, 2017. "Fiscal Episodes and Market Power," Open Economies Review, Springer, vol. 28(2), pages 233-250, April.
    • Handle: RePEc:kap:openec:v:28:y:2017:i:2:d:10.1007_s11079-016-9419-7
    DOI: 10.1007/s11079-016-9419-7
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    6. Georgios Georgantas & Maria Kasselaki & Athanasios Tagkalakis, 2022. "The short-run effects of fiscal adjustment in OECD countries," Working Papers 308, Bank of Greece.
    7. Syed Sadaqat Ali Shah & Muhammad Asim Afridi, 2023. "Cyclical variation of fiscal multipliers in Caucasus and Central Asia economies: an empirical evidence," Economic Change and Restructuring, Springer, vol. 56(6), pages 4531-4563, December.

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