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Public Spending During Great Moderation and Fiscal Dominance: History, Global Landscape, and Policy Issues

In: The Palgrave Handbook of Public Debt and Policy Mix

Author

Listed:
  • Matthieu Llorca

    (Université Bourgogne Europe)

Abstract

This chapter explores the evolution of public spending and the determinants of its growth during the contemporary periods of the Great Moderation (1982 to 2003) and Fiscal Dominance (2004 to 2019). First, our analysis draws on comparative data on public spending in developed, emerging, and developing countries between 1982 and 2019, distinguishing between the two periods of Great Moderation and Fiscal Dominance. Then, in the second part, we review the literature on the determinants of public spending, focusing on three main factors that have been debated at the theoretical and empirical levels: Wagner's law, the political and institutional determinants of public spending, and the impacts of globalization on the size of the State. Finally, in the last section, we make economic policy recommendations on public spending, based on the findings of the literature on the size of public spending multipliers, advocating a countercyclical fiscal policy and proposing to make fiscal rules more flexible in order to address current societal challenges.

Suggested Citation

  • Matthieu Llorca, 2026. "Public Spending During Great Moderation and Fiscal Dominance: History, Global Landscape, and Policy Issues," Springer Books, in: Chicot Eboué (ed.), The Palgrave Handbook of Public Debt and Policy Mix, chapter 2, pages 39-63, Springer.
    • Handle: RePEc:spr:sprchp:978-3-032-12508-8_2
    DOI: 10.1007/978-3-032-12508-8_2
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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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