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Extraordinary Measures: The Role of Debt Levels in Fiscal Policy Responses to Covid-19

Author

Listed:
  • Adam Elbourne
  • Giulia Piccillo
  • Konstantinos Velentzas

Abstract

We use SVAR models for 18 economies to estimate how much fiscal policy deviated from pre-pandemic norms during the Covid-19 pandemic. For most countries, fiscal policy was more expansive than the pre-pandemic norm predicts based on the state of the economy during the pandemic. The size of the deviation from the pre-pandemic norm is not related to the level of government debt on the eve of the pandemic, as fiscal space concepts would predict.

Suggested Citation

  • Adam Elbourne & Giulia Piccillo & Konstantinos Velentzas, 2023. "Extraordinary Measures: The Role of Debt Levels in Fiscal Policy Responses to Covid-19," CESifo Working Paper Series 10852, CESifo.
    • Handle: RePEc:ces:ceswps:_10852
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    References listed on IDEAS

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    1. Haroutunian, Stephan & Hauptmeier, Sebastian & Leiner-Killinger, Nadine, 2020. "The COVID-19 crisis and its implications for fiscal policies," Economic Bulletin Boxes, European Central Bank, vol. 4.
    2. Enrique Alberola & Yavuz Arslan & Gong Cheng & Richhild Moessner, 2021. "Fiscal response to the COVID‐19 crisis in advanced and emerging market economies†," Pacific Economic Review, Wiley Blackwell, vol. 26(4), pages 459-468, October.
    3. Greppmair, Stefan & Jank, Stephan & Smajlbegovic, Esad, 2023. "On the importance of fiscal space: Evidence from short sellers during the COVID-19 pandemic," Journal of Banking & Finance, Elsevier, vol. 147(C).
    4. Makin, Anthony J. & Layton, Allan, 2021. "The global fiscal response to COVID-19: Risks and repercussions," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 340-349.
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    Keywords

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    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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