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Fiscal policy responsiveness, persistence, and discretion

  • António Afonso

    ()

  • Luca Agnello

    ()

  • Davide Furceri

    ()

In this working paper, we decompose fiscal policy in three components: i) responsiveness, ii) persistence and iii) discretion. Using a sample of 132 countries, our results point out that fiscal policy tends to be more persistent than responding to output variations. We also found that while the effect of cross-country covariates is positive (negative) for discretion, it is negative (positive) for persistence, suggesting that countries with higher persistence have lower discretion and vice versa. In particular, while government size, country size and income have negative effects on the discretion component of fiscal policy, they tend to increase fiscal policy persistence. Réaction au cycle, persistance et effet discrétionnaire de la politique budgétaire Nous décomposons la politique budgétaire en trois composantes : i) réponse, ii) persistance et iii) effet discrétionnaire. Utilisant un échantillon de 132 pays, nos résultats montrent que la politique budgétaire tend à être plus persistante qu’elle ne répond aux variations du PIB. Nous trouvons également qu’alors que l’effet des covariations entre pays affecte positivement (négativement) l’effet discrétionnaire, il a un effet négatif (positif) sur la persistance. Cela suggère que les pays dotés d’une forte persistance ont un effet discrétionnaire plus faible et vice versa. En particulier, alors que la taille du gouvernement, la taille du pays et le revenu ont des effets négatifs sur la composante discrétionnaire de la politique budgétaire, ils tendent à augmenter la persistance de la politique budgétaire.

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Article provided by Springer in its journal Public Choice.

Volume (Year): 145 (2010)
Issue (Month): 3 (December)
Pages: 503-530

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Handle: RePEc:kap:pubcho:v:145:y:2010:i:3:p:503-530
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