Fiscal policy cyclicality in South Asian economies

This paper analyses the cyclical nature of fiscal policy in South Asian economies. Drawing on the recent literature, we assess whether these economies have graduated to a counter-cyclical fiscal policy in the recent period. We find that fiscal policy is procyclical in most of the South Asian economies. Our analysis shows that the evidence of graduation to a counter-cyclical fiscal policy is weak for South-Asian economies. Our findings are robust to alternative methods of extracting the cyclical component. This has implications for macro-stabilisation policies in these countries and warrants a rethink of the fiscal policy framework.