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Flexible Fiscal Rules and Countercyclical Fiscal Policy

2016-01-22 Business & Economics
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Release : 2016-01-22
Genre : Business & Economics
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Book Rating : 465/5 ( reviews)

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Book Synopsis Flexible Fiscal Rules and Countercyclical Fiscal Policy by : Ms.Martine Guerguil

Download or read book Flexible Fiscal Rules and Countercyclical Fiscal Policy written by Ms.Martine Guerguil. This book was released on 2016-01-22. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the impact of different types of flexible fiscal rules on the procyclicality of fiscal policy with propensity scores-matching techniques, thus mitigating traditional self-selection problems. It finds that not all fiscal rules have the same impact: the design matters. Specifically, investment-friendly rules reduce the procyclicality of both overall and investment spending. The effect appears stronger in bad times and when the rule is enacted at the national level. The introduction of escape clauses in fiscal rules does not seem to affect the cyclical stance of public spending. The inclusion of cyclical adjustment features in spending rules yields broadly similar results. The results are mixed for cyclically-adjusted budget balance rules: enacting the latter is associated with countercyclical movements in overall spending, but with procyclical changes in investment spending. Structural factors, such as past debt, the level of development, the volatility of terms of trade, natural resources endowment, government stability, and the legal enforcement and monitoring arrangements backing the rule also influence the link between fiscal rules and countercyclicality. The results are robust to a wide set of alternative specifications.

Countercyclical Fiscal Policy

2002 Business cycles
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Release : 2002
Genre : Business cycles
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Book Synopsis Countercyclical Fiscal Policy by : Carlos Budnevich L.

Download or read book Countercyclical Fiscal Policy written by Carlos Budnevich L.. This book was released on 2002. Available in PDF, EPUB and Kindle. Book excerpt:

Revisiting the Countercyclicality of Fiscal Policy

2023-04-29 Business & Economics
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Release : 2023-04-29
Genre : Business & Economics
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Book Synopsis Revisiting the Countercyclicality of Fiscal Policy by : João Tovar Jalles

Download or read book Revisiting the Countercyclicality of Fiscal Policy written by João Tovar Jalles. This book was released on 2023-04-29. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a novel dataset of time-varying measures on the degree of countercyclicality of fiscal policies for advanced and developing economies between 1980 and 2021. The use of time-varying measures of fiscal stabilization, with special attention to potential endogenity issues, overcomes the major limitation of previous studies and alllows the analysis to account for both country-specific as well as global factors. The paper also examines the key determinants of countercyclicality of fiscal policy with a focus on factors as severe crises, informality, financial development, and governance. Empirical results show that (i) fiscal policy tends to be more counter-cyclical during severe crises than typical recessions, especially for advanced economies; (ii) fiscal counter-cyclicality has increased over time for many economies over the last two decades; (iii) discretionary and automatic countercyclicality are both strong in advanced economies but acyclical (at times procyclical) in low-income countries, (iv) fiscal countercyclicality operates primarily through the expenditure channel, particularly for social benefits, (vi) better financial development, larger government size and stronger institutional quality are associated with larger countercyclical effects of fiscal policy. Our results are robust to various specifications and endogeneity checks.

Procyclical Fiscal Policy

2018-12-28 Business & Economics
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Release : 2018-12-28
Genre : Business & Economics
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Book Rating : 958/5 ( reviews)

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Book Synopsis Procyclical Fiscal Policy by : Toshihiro Ihori

Download or read book Procyclical Fiscal Policy written by Toshihiro Ihori. This book was released on 2018-12-28. Available in PDF, EPUB and Kindle. Book excerpt: Conventional wisdom dictates that a fiscal policy should be counter-cyclical. However, contrary to this conventional views, recent research has demonstrated that fiscal policy is actually procyclical in most developing countries. In this book, we attempt to propose a new interpretation of this procyclicality after reviewing theoretical and empirical evolution of the research. In particular, by incorporating the political effort behavior of private agents into a weak government model, we explore how income fluctuations affect the optimal budget deficits in a political economy. If the government can control the political behavior, normally, the optimal budget deficit should rise in a recession as a first-best case; however, interestingly, a recession does not necessarily prompt an increase in the budget deficits in a second-best political economy. The response of the budget deficits to income fluctuations mainly depends on the efficiency of political effort, which may correspond to the degree of democracy and bureaucratic efficiency of the governments. We test the prediction of the pro-cyclical fiscal policy and find it applicable for democratic countries with semi-efficient governments including Japan.

Why is Fiscal Policy Often Procyclical?

2005 Fiscal policy
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Release : 2005
Genre : Fiscal policy
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Book Synopsis Why is Fiscal Policy Often Procyclical? by : Alberto Alesina

Download or read book Why is Fiscal Policy Often Procyclical? written by Alberto Alesina. This book was released on 2005. Available in PDF, EPUB and Kindle. Book excerpt: Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the "starving the Leviathan" classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.

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