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Cyclical asymmetry in fiscal variables

Author

Listed:
  • Fabrizio Balassone

    () (Bank of Italy, Economic Research Department)

  • Maura Francese

    () (Bank of Italy, Economic Research Department)

  • Stefania Zotteri

    () (Bank of Italy, Economic Research Department)

Abstract

In a stylised framework of fiscal policy determination that considers both structural targets and cyclical factors, we find significant cyclical asymmetry in the behaviour of fiscal variables in a sample of fourteen EU countries from 1970 to 2004, with budgetary balances (both overall and primary) deteriorating in contractions but not improving correspondingly in expansions. Analysis of budget components reveals that the asymmetry is due to expenditure, in particular transfers in cash. We find no evidence that the fiscal rules introduced in 1992 with the Treaty of Maastricht affected the cyclical behaviour of the variables examined. Numerical simulations show that cyclical asymmetry inflated average deficit levels, contributing significantly to the accumulation of debt.

Suggested Citation

  • Fabrizio Balassone & Maura Francese & Stefania Zotteri, 2008. "Cyclical asymmetry in fiscal variables," Temi di discussione (Economic working papers) 671, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_671_08
    as

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    References listed on IDEAS

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    Citations

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    Cited by:

    1. António Afonso & Peter Claeys & Ricardo Sousa, 2011. "Fiscal regime shifts in Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(2), pages 83-108, August.
    2. Wichmann, Roberta Moreira & Portugal, Marcelo Savino, 2013. "Política Fiscal Assimétrica: O Caso do Brasil," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 67(3), September.
    3. Julia Darby & Jacques Melitz, 2011. "Joint Estimates of Automatic and Discretionary Fiscal Policy: the OECD 1981-2003," Working Papers 2011-14, CEPII research center.
    4. Arze del Granado, Javier & Gupta, Sanjeev & Hajdenberg, Alejandro, 2013. "Is Social Spending Procyclical? Evidence for Developing Countries," World Development, Elsevier, vol. 42(C), pages 16-27.
    5. repec:fgv:epgrbe:v:67:n:3:a:6 is not listed on IDEAS
    6. Roberta Moreira Wichmann & Marcelo Savino Portugal, 2014. "Política Fiscal Assimétrica: O Caso Do Brasil," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 038, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Sanjeev Gupta & Alejandro Hajdenberg & Javier Arze del Granado, 2010. "Is Social Spending Procyclical?," IMF Working Papers 10/234, International Monetary Fund.
    8. Cronin, David & McQuinn, Kieran, 2017. "The cyclicality of Irish fiscal policy ex-ante and ex-post," Papers WP581, Economic and Social Research Institute (ESRI).
    9. Larch, Martin, 2010. "Fiscal performance and income inequality: Are unequal societies more deficit-prone? Some cross-country evidence," MPRA Paper 23496, University Library of Munich, Germany.
    10. Julia Darby & Jacques Melitz, 2011. "Joint estimates of automatic and discretionary fiscal policy for the OECD," Working Papers 1122, University of Strathclyde Business School, Department of Economics.

    More about this item

    Keywords

    fiscal stabilisation; government expenditure; government debt; fiscal rules;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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