IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-04059017.html

Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions

Author

Listed:
  • Kady Keita

    (FMI - International Money Fund)

  • Camelia Turcu

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, FMI - International Money Fund)

Abstract

We explore under different exchange rate regimes how fiscal rules and institutions can reduce the procyclical stance of fiscal policy (i.e. how government spending responds to GDP fluctuations). We construct a fiscal rules index which is a composite index measuring the overall strength of fiscal rules in a country at a given time. We use it in a dynamic model with a GMM estimator, for a panel of 153 countries over the period 1993–2015. We find that under fixed exchange rate regimes, while better institutions can reduce procyclicality, rules increase it or do not affect it. This result suggests that under fixed exchange rate regimes, a focus should be put on stronger institutional quality rather than on the adoption of fiscal rules. However, under flexible exchange rate regimes, we find that institutions and rules are complementary in reducing procyclicality. Rules help reduce procyclicality and are more effective, in particular, when institutions are stronger. Our results are robust to different specifications as well as to the use of alternative variables of institutional quality.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Kady Keita & Camelia Turcu, 2022. "Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions," Post-Print hal-04059017, HAL.
    • Handle: RePEc:hal:journl:hal-04059017
    DOI: 10.1057/s41294-022-00197-0
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alessandra Cepparulo & Giuseppe Eusepi & Luisa Giuriato, 2024. "Public Finance, Fiscal Rules and Public–Private Partnerships: Lessons for Post-COVID-19 Investment Plans," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 66(1), pages 191-213, March.
    2. Răzvan-George Cotescu & Miruna-Mihaela Vasilca & Edi-Cristian Dumitra & Cezara-Georgiana Radu, 2025. "Monetary and Fiscal Policy Strategies for Enhancing Financial Sustainability and Growth in Startups: Insights From Romania’s Ecosystem," Journal of Financial Studies, Institute of Financial Studies, vol. 10(18), pages 195-210, May.
    3. Ofori-Sasu, Daniel & Agbloyor, Elikplimi Komla & Nsafoah, Dennis & Asongu, Simplice A., 2024. "Banking behaviour and political business cycle in Africa: The role of independent regulatory policies of the central bank," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).
    4. Okombi, Idrys Fransmel & Mampieme, Vaccili Belneche, 2024. "Cyclicality of public debt in developing countries: Does dependence on natural resources matter?," Resources Policy, Elsevier, vol. 96(C).

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-04059017. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.