Boom-Bust Phases in Asset Prices and Fiscal Policy Behavior
Boom and bust phases in asset prices have become a pervasive feature of macroeconomic developments in many advanced economies. This paper studies fiscal policy during boom-bust phases in asset prices and draws several conclusions. First, expansions and contractions in economic activity during such boom-bust phases tend to be highly persistent, cyclical turning points are harder to forecast, and the margins of error for output gap estimates can be large. Second, conventional estimates of revenue elasticities seem not to allow an accurate assessment of fiscal stance or the strength of underlying fiscal positions during boom-bust phases. Third, boom-bust phases tend to exacerbate already existing procyclical policy biases, as well as political-economy biases, toward higher spending and public-debt ratios.
Volume (Year): 43 (2007)
Issue (Month): 6 (November)
|Contact details of provider:|| Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Galí, Jordi & Perotti, Roberto, 2003.
"Fiscal Policy and Monetary Integration in Europe,"
CEPR Discussion Papers
3933, C.E.P.R. Discussion Papers.
- G. Russell Kincaid & Charles Collyns, 2003. "Managing Financial Crises; Recent Experience and Lessons for Latin America," IMF Occasional Papers 217, International Monetary Fund.
- Buti, Marco, 2003. "Revisiting the stability and growth pact: grand design or internal adjustment?," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34908, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Buti, Marco & Eijffinger, Sylvester C W & Franco, Daniele, 2003.
"Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?,"
CEPR Discussion Papers
3692, C.E.P.R. Discussion Papers.
- Buti, Marco & Eijffinger, Sylvester C.W. & Franco, Daniele, 2003. "Revisiting the stability and growth pact: grand design or internal adjustment?," Seminarios y Conferencias 6567, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting the Stability and Growth Pact: grand design or internal adjustment?," European Economy - Economic Papers 2008 - 2015 180, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Bouthevillain, Carine & Cour-Thimann, Philippine & van de Dool, Gerrit & Hernández de Cos, Pablo & Langenus, Geert & Mohr, Matthias & Momigliano, Sandro & Tujula, Mika, 2001.
"Cyclically adjusted budget balances: an alternative approach,"
Working Paper Series
0077, European Central Bank.
- Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
- Richard Hemming & Axel Schimmelpfennig & Michael Kell, 2003. "Fiscal Vulnerability and Financial Crises in Emerging Market Economies," IMF Occasional Papers 218, International Monetary Fund.
- DETKEN Carsten & SMETS Frank, .
"Asset Price Booms and Monetary Policy,"
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998.
"The Financial Accelerator in a Quantitative Business Cycle Framework,"
NBER Working Papers
6455, National Bureau of Economic Research, Inc.
- Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
- Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
- Don Harding & Adrian Pagan, 2000.
"Disecting the Cycle: A Methodological Investigation,"
Econometric Society World Congress 2000 Contributed Papers
1164, Econometric Society.
- Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
- Honohan, Patrick & Klingebiel, Daniela, 2003. "The fiscal cost implications of an accommodating approach to banking crises," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1539-1560, August.
- Albert Jaeger, 2003. "Corporate Balance Sheet Restructuring and Investment in the Euro Area," IMF Working Papers 03/117, International Monetary Fund.
- Marín, José M., 2002. "Sustainability of public finances and automatic stabilisation under a rule of budgetary discipline," Working Paper Series 0193, European Central Bank.
- Bordo, Michael D & Jeanne, Olivier, 2002.
"Boom-Busts in Asset Prices, Economic Instability and Monetary Policy,"
CEPR Discussion Papers
3398, C.E.P.R. Discussion Papers.
- Michael D. Bordo & Olivier Jeanne, 2002. "Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy," NBER Working Papers 8966, National Bureau of Economic Research, Inc.
- Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
- Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
- Victor Zarnowitz, 1984. "Recent Work on Business Cycles in Historical Perspective: Review of Theories and Evidence," NBER Working Papers 1503, National Bureau of Economic Research, Inc.
- Claudio E. V. Borio & Wiliam English & Andrew Filardo, 2003.
"A tale of two perspectives: old or new challenges for monetary policy?,"
BIS Working Papers
127, Bank for International Settlements.
- Claudio Borio & William English & Andrew Filardo, 2003. "A tale of two perspectives: old or new challenges for monetary policy?," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 1-59 Bank for International Settlements.
When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:43:y:2007:i:6:p:45-66. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Nguyen)
If references are entirely missing, you can add them using this form.