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Fiscal Policy Coordination in OECD Countries

  • Tuomo Mäki
  • Matti Virén
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    This paper deals with fiscal policy coordination. In specifically it focuses on the question of how fiscal policy can be coordinated in the world where countries differ a lot in terms of cyclical behaviour and importance of country-specific shocks and well as the fiscal policy multipliers. To answer this question, we compute cyclical sensitivity measures for different components of the deficit variable and the discretionary measure of fiscal policy for all OECD countries for the period 1960-1996. For that purpose, we use the Blanchard Fiscal Impulse (BFI) measure. The cross-country behaviour and the GDP effects of these measures are then scrutinized. The outcome of this analysis is that very little evidence of fiscal policy coordination can be detected. This result holds even if we take into account the forecast errors in terms of GDP growth.

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    Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 160.

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    Date of creation: 01 Jan 1998
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    Handle: RePEc:fer:dpaper:160
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    1. Canzoneri, Matthew B & Gray, Jo Anna, 1985. "Monetary Policy Games and the Consequences of Non-cooperative Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 547-64, October.
    2. W. Max Corden, 1985. "On Transmission and Coordination Under Flexible Exchange Rates," NBER Chapters, in: International Economic Policy Coordination, pages 8-36 National Bureau of Economic Research, Inc.
    3. Ray C. Fair, 1977. "On Modeling the Economic Linkages among Countries," Cowles Foundation Discussion Papers 465, Cowles Foundation for Research in Economics, Yale University.
    4. Alan Sutherland, . "Fiscal Crises and Aggregate Demand: Can High Public Debt Reverse the Effects of Fiscal Policy?," Discussion Papers 95/17, Department of Economics, University of York.
    5. Tanzi, Vito & Schuknecht, Ludger, 1997. "Reconsidering the Fiscal Role of Government: The International Perspective," American Economic Review, American Economic Association, vol. 87(2), pages 164-68, May.
    6. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
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