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Fiscal policy and regional output volatility: Evidence from Russia

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  • Eller, Markus
  • Fidrmuc, Jarko
  • Fungáčová, Zuzana

Abstract

This paper investigates the relationship between fiscal policy and output volatility in Russian regions between 2000 and 2009. System GMM estimation techniques are used to account for potential endogeneity between output volatility and fiscal developments. Our main finding is that fiscal activism, proxied by various measures of discretionary fiscal policy, contributes to output volatility and so induces macroeconomic instability at the regional level in Russia. This result corroborates previous studies using cross-country data. To reduce business cycle fluctuations, it would be necessary to curtail pro-cyclical fiscal activism at the regional level, e.g. via fiscal rules and sound institutions of fiscal federalism.

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  • Eller, Markus & Fidrmuc, Jarko & Fungáčová, Zuzana, 2013. "Fiscal policy and regional output volatility: Evidence from Russia," BOFIT Discussion Papers 13/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2013_013
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    Cited by:

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    2. Fidrmuc, Jarko & Degler, Moritz, 2021. "Temporal And Spatial Dependence Of Interregional Risk Sharing: Evidence From Russia," Macroeconomic Dynamics, Cambridge University Press, vol. 25(1), pages 178-200, January.
    3. Dreger, Christian & Kholodilin, Konstantin A. & Ulbricht, Dirk & Fidrmuc, Jarko, 2016. "Between the Hammer and the Anvil: The Impact of Economic Sanctions and Oil Prices on Russia’s Ruble," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 44(2), pages 295-308.
    4. Claudiu Tiberiu Albulescu, 2022. "Bank Financial Stability and International Oil Prices: Evidence from Listed Russian Public Banks," Eastern European Economics, Taylor & Francis Journals, vol. 60(3), pages 217-246, May.
    5. Muhsin Ali & Karim Khan, 2020. "Volatility in Discretionary Public Spending and Economic Growth: A Cross Country Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(1), pages 45-68.
    6. El-Shagi, Makram & Fidrmuc, Jarko & Yamarik, Steven, 2020. "Inequality and credit growth in Russian regions," Economic Modelling, Elsevier, vol. 91(C), pages 550-558.
    7. Shobande Olatunji Abdul, 2020. "Fiscal Rule in Africa," Open Economics, De Gruyter, vol. 3(1), pages 112-120, January.
    8. Hansjörg Blöchliger & Olivier Durand-Lasserve, 2018. "The drivers of regional growth in Russia: A baseline model with applications," OECD Economics Department Working Papers 1523, OECD Publishing.
    9. Shobande Olatunji Abdul, 2020. "Fiscal Rule in Africa," Open Economics, De Gruyter, vol. 3(1), pages 112-120, January.
    10. Vlasov, S. & Deryugina, E., 2018. "Fiscal Multipliers in Russia," Journal of the New Economic Association, New Economic Association, vol. 38(2), pages 104-119.
    11. Claudiu Albulescu, 2020. "Bank financial stability, bank valuation and international oil prices: Evidence from listed Russian public banks," Papers 2004.12791, arXiv.org.
    12. Michael V. Alexeev & Andrey V. Korytin & Elena V. Melkova, 2022. "Regional Tax Competition in Canada, the United States and Russia: Assessment of Regulatory Experience," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 8-24, December.

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    More about this item

    Keywords

    output volatility; automatic stabilizers; discretionary fiscal policy; dynamic panel models; Russia;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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