New Evidence on the Cyclicality of Fiscal Policy

This paper presents new evidence on the patterns of cyclicality in the fiscal policy stance of developing and industrialized countries over a period of more than three decades covering 180 countries during 1980–2012. First, the paper considers issu...

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Main Authors:	Carneiro, Francisco G., Garrido, Leonardo
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	OUTPUT VOLATILITY MONETARY POLICY CAPITAL MARKETS CAPITA INCOME GOVERNMENT EXPENDITURES FISCAL BALANCES LAGS INTERNATIONAL CAPITAL INTERNATIONAL COUNTRY RISK GUIDE STRUCTURAL CHANGE INCOME INTEREST GOVERNMENT SPENDING EMERGING ECONOMIES BAND-PASS FILTER REAL GDP EXCHANGE GOVERNMENT REVENUES GDP PER CAPITA MACROECONOMIC POLICY DEBT MANAGEMENT INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES POLITICAL ECONOMY EXPORTERS INTERNATIONAL CAPITAL MARKETS REVENUES FISCAL POLICY MACROECONOMIC CONDITIONS VARIABLES CORRELATION COEFFICIENT RICH ECONOMIES INTERACTION TERMS TAX CORRELATION COEFFICIENTS RESERVE INFLATION INTERNATIONAL BANK INSTRUMENTS DEVELOPED COUNTRIES TRENDS ECONOMIC OUTLOOK CENTRAL BANK GOVERNMENT CONSUMPTION ECONOMIC ACTIVITY CHOICE FISCAL POLICIES FISCAL RULES PER CAPITA INCOME DEVELOPMENT ECONOMICS MIDDLE INCOME CYCLICAL POLICIES CRISIS ECONOMETRICS INTEREST RATES MONETARY FUND CRITERIA DEBT MARKETS HIGH INCOME GROSS DOMESTIC PRODUCT PER CAPITA BUSINESS CYCLE MIDDLE-INCOME COUNTRIES TAX REVENUES FLUCTUATIONS RECESSIONS RESERVES GROSS DOMESTIC PRODUCT INCREASE IN EXPENDITURES FINANCE ECONOMIC RESEARCH PUBLIC INVESTMENT EXPENDITURE FISCAL FEDERAL RESERVE CREDIT CONSTRAINTS GOOD ECONOMIC PERFORMANCE FISCAL RULE WAGES INSTRUMENTAL VARIABLE ESTIMATION VOLATILITY ECONOMETRIC ANALYSIS COUNTRY RISK LEVEL OF INCOME FINANCIAL CRISIS VALUE CREDIT STRUCTURAL BREAKS MACROECONOMICS PRUDENTIAL REGULATIONS GOVERNMENT EXPENDITURE EXPENDITURES CAPITAL FLOWS PROPERTIES NUISANCE PARAMETER PRIVATE SECTOR REAL GROSS DOMESTIC PRODUCT FISCAL STANCE EXPANSIONARY FISCAL POLICY PUBLIC DEBT PRIMARY BALANCE FIXED EFFECTS FISCAL SUSTAINABILITY INSURANCE MACROECONOMIC VARIABLES BUSINESS CYCLES CYCLICAL FISCAL POLICY GDP GOODS THEORY INTERNATIONAL MONETARY FUND INVESTMENT RANDOM WALK NEOCLASSICAL MODELS DOMESTIC CREDIT SHARE FISCAL MANAGEMENT FINANCIAL MARKETS FISCAL BALANCE RISK MANAGEMENT ECONOMIC TIME SERIES LENDING CHECK STICKY PRICES CREDIT GROWTH FISCAL BEHAVIOR MACROECONOMIC POLICIES FISCAL DISCIPLINE GDP DEFLATOR OUTCOMES MIDDLE INCOME COUNTRIES PRO-CYCLICAL POLICIES DEVELOPMENT POLICY GROWTH
Online Access:	http://documents.worldbank.org/curated/en/2015/06/24596072/new-evidence-cyclicality-fiscal-policy http://hdl.handle.net/10986/22166

id	okr-10986-22166
recordtype	oai_dc
spelling	okr-10986-221662021-04-23T14:04:07Z New Evidence on the Cyclicality of Fiscal Policy Carneiro, Francisco G. Garrido, Leonardo OUTPUT VOLATILITY MONETARY POLICY CAPITAL MARKETS CAPITA INCOME GOVERNMENT EXPENDITURES FISCAL BALANCES LAGS INTERNATIONAL CAPITAL INTERNATIONAL COUNTRY RISK GUIDE STRUCTURAL CHANGE INCOME INTEREST GOVERNMENT SPENDING EMERGING ECONOMIES BAND-PASS FILTER REAL GDP EXCHANGE GOVERNMENT REVENUES GDP PER CAPITA MACROECONOMIC POLICY DEBT MANAGEMENT INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES POLITICAL ECONOMY EXPORTERS INTERNATIONAL CAPITAL MARKETS REVENUES FISCAL POLICY MACROECONOMIC CONDITIONS VARIABLES CORRELATION COEFFICIENT RICH ECONOMIES INTERACTION TERMS TAX CORRELATION COEFFICIENTS RESERVE INFLATION INTERNATIONAL BANK INSTRUMENTS DEVELOPED COUNTRIES TRENDS ECONOMIC OUTLOOK CENTRAL BANK GOVERNMENT CONSUMPTION ECONOMIC ACTIVITY CHOICE FISCAL POLICIES FISCAL RULES PER CAPITA INCOME DEVELOPMENT ECONOMICS MIDDLE INCOME CYCLICAL POLICIES CRISIS ECONOMETRICS INTEREST RATES MONETARY FUND CRITERIA DEBT MARKETS HIGH INCOME GROSS DOMESTIC PRODUCT PER CAPITA BUSINESS CYCLE MIDDLE-INCOME COUNTRIES TAX REVENUES FLUCTUATIONS RECESSIONS RESERVES GROSS DOMESTIC PRODUCT INCREASE IN EXPENDITURES FINANCE ECONOMIC RESEARCH PUBLIC INVESTMENT EXPENDITURE FISCAL FEDERAL RESERVE CREDIT CONSTRAINTS GOOD ECONOMIC PERFORMANCE FISCAL RULE WAGES INSTRUMENTAL VARIABLE ESTIMATION VOLATILITY ECONOMETRIC ANALYSIS COUNTRY RISK LEVEL OF INCOME FINANCIAL CRISIS VALUE CREDIT STRUCTURAL BREAKS MACROECONOMICS PRUDENTIAL REGULATIONS GOVERNMENT EXPENDITURE EXPENDITURES CAPITAL FLOWS PROPERTIES NUISANCE PARAMETER PRIVATE SECTOR REAL GROSS DOMESTIC PRODUCT FISCAL STANCE EXPANSIONARY FISCAL POLICY PUBLIC DEBT PRIMARY BALANCE FIXED EFFECTS FISCAL SUSTAINABILITY INSURANCE MACROECONOMIC VARIABLES BUSINESS CYCLES CYCLICAL FISCAL POLICY GDP GOODS THEORY INTERNATIONAL MONETARY FUND INVESTMENT RANDOM WALK NEOCLASSICAL MODELS DOMESTIC CREDIT SHARE FISCAL MANAGEMENT FINANCIAL MARKETS FISCAL BALANCE RISK MANAGEMENT ECONOMIC TIME SERIES LENDING CHECK STICKY PRICES CREDIT GROWTH FISCAL BEHAVIOR MACROECONOMIC POLICIES FISCAL DISCIPLINE GDP DEFLATOR OUTCOMES MIDDLE INCOME COUNTRIES PRO-CYCLICAL POLICIES DEVELOPMENT POLICY GROWTH This paper presents new evidence on the patterns of cyclicality in the fiscal policy stance of developing and industrialized countries over a period of more than three decades covering 180 countries during 1980–2012. First, the paper considers issues of robustness in the choice of the proxy for fiscal cyclicality by using alternative filtering methods to check whether this influences the results and leads to any differences in a country’s reported within-period average, and across-period changes in fiscal stance. Second, a country-specific approach is used to split the sample into sub-periods based on a test for structural break in the series of real gross domestic product per capita. Third, the paper investigates the extent to which countries behave pro-cyclically or counter-cyclically in different phases of the business cycle. In line with earlier findings in the literature, the analysis confirms that there is a causal link running from stronger institutions to less pro-cyclical fiscal policy, even after controlling for the endogeneity of institutions and other determinants of fiscal policy. 2015-07-14T22:30:25Z 2015-07-14T22:30:25Z 2015-06 Working Paper http://documents.worldbank.org/curated/en/2015/06/24596072/new-evidence-cyclicality-fiscal-policy http://hdl.handle.net/10986/22166 English en_US Policy Research Working Paper;No. 7293 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Caribbean Latin America
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	OUTPUT VOLATILITY MONETARY POLICY CAPITAL MARKETS CAPITA INCOME GOVERNMENT EXPENDITURES FISCAL BALANCES LAGS INTERNATIONAL CAPITAL INTERNATIONAL COUNTRY RISK GUIDE STRUCTURAL CHANGE INCOME INTEREST GOVERNMENT SPENDING EMERGING ECONOMIES BAND-PASS FILTER REAL GDP EXCHANGE GOVERNMENT REVENUES GDP PER CAPITA MACROECONOMIC POLICY DEBT MANAGEMENT INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES POLITICAL ECONOMY EXPORTERS INTERNATIONAL CAPITAL MARKETS REVENUES FISCAL POLICY MACROECONOMIC CONDITIONS VARIABLES CORRELATION COEFFICIENT RICH ECONOMIES INTERACTION TERMS TAX CORRELATION COEFFICIENTS RESERVE INFLATION INTERNATIONAL BANK INSTRUMENTS DEVELOPED COUNTRIES TRENDS ECONOMIC OUTLOOK CENTRAL BANK GOVERNMENT CONSUMPTION ECONOMIC ACTIVITY CHOICE FISCAL POLICIES FISCAL RULES PER CAPITA INCOME DEVELOPMENT ECONOMICS MIDDLE INCOME CYCLICAL POLICIES CRISIS ECONOMETRICS INTEREST RATES MONETARY FUND CRITERIA DEBT MARKETS HIGH INCOME GROSS DOMESTIC PRODUCT PER CAPITA BUSINESS CYCLE MIDDLE-INCOME COUNTRIES TAX REVENUES FLUCTUATIONS RECESSIONS RESERVES GROSS DOMESTIC PRODUCT INCREASE IN EXPENDITURES FINANCE ECONOMIC RESEARCH PUBLIC INVESTMENT EXPENDITURE FISCAL FEDERAL RESERVE CREDIT CONSTRAINTS GOOD ECONOMIC PERFORMANCE FISCAL RULE WAGES INSTRUMENTAL VARIABLE ESTIMATION VOLATILITY ECONOMETRIC ANALYSIS COUNTRY RISK LEVEL OF INCOME FINANCIAL CRISIS VALUE CREDIT STRUCTURAL BREAKS MACROECONOMICS PRUDENTIAL REGULATIONS GOVERNMENT EXPENDITURE EXPENDITURES CAPITAL FLOWS PROPERTIES NUISANCE PARAMETER PRIVATE SECTOR REAL GROSS DOMESTIC PRODUCT FISCAL STANCE EXPANSIONARY FISCAL POLICY PUBLIC DEBT PRIMARY BALANCE FIXED EFFECTS FISCAL SUSTAINABILITY INSURANCE MACROECONOMIC VARIABLES BUSINESS CYCLES CYCLICAL FISCAL POLICY GDP GOODS THEORY INTERNATIONAL MONETARY FUND INVESTMENT RANDOM WALK NEOCLASSICAL MODELS DOMESTIC CREDIT SHARE FISCAL MANAGEMENT FINANCIAL MARKETS FISCAL BALANCE RISK MANAGEMENT ECONOMIC TIME SERIES LENDING CHECK STICKY PRICES CREDIT GROWTH FISCAL BEHAVIOR MACROECONOMIC POLICIES FISCAL DISCIPLINE GDP DEFLATOR OUTCOMES MIDDLE INCOME COUNTRIES PRO-CYCLICAL POLICIES DEVELOPMENT POLICY GROWTH
spellingShingle	OUTPUT VOLATILITY MONETARY POLICY CAPITAL MARKETS CAPITA INCOME GOVERNMENT EXPENDITURES FISCAL BALANCES LAGS INTERNATIONAL CAPITAL INTERNATIONAL COUNTRY RISK GUIDE STRUCTURAL CHANGE INCOME INTEREST GOVERNMENT SPENDING EMERGING ECONOMIES BAND-PASS FILTER REAL GDP EXCHANGE GOVERNMENT REVENUES GDP PER CAPITA MACROECONOMIC POLICY DEBT MANAGEMENT INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES POLITICAL ECONOMY EXPORTERS INTERNATIONAL CAPITAL MARKETS REVENUES FISCAL POLICY MACROECONOMIC CONDITIONS VARIABLES CORRELATION COEFFICIENT RICH ECONOMIES INTERACTION TERMS TAX CORRELATION COEFFICIENTS RESERVE INFLATION INTERNATIONAL BANK INSTRUMENTS DEVELOPED COUNTRIES TRENDS ECONOMIC OUTLOOK CENTRAL BANK GOVERNMENT CONSUMPTION ECONOMIC ACTIVITY CHOICE FISCAL POLICIES FISCAL RULES PER CAPITA INCOME DEVELOPMENT ECONOMICS MIDDLE INCOME CYCLICAL POLICIES CRISIS ECONOMETRICS INTEREST RATES MONETARY FUND CRITERIA DEBT MARKETS HIGH INCOME GROSS DOMESTIC PRODUCT PER CAPITA BUSINESS CYCLE MIDDLE-INCOME COUNTRIES TAX REVENUES FLUCTUATIONS RECESSIONS RESERVES GROSS DOMESTIC PRODUCT INCREASE IN EXPENDITURES FINANCE ECONOMIC RESEARCH PUBLIC INVESTMENT EXPENDITURE FISCAL FEDERAL RESERVE CREDIT CONSTRAINTS GOOD ECONOMIC PERFORMANCE FISCAL RULE WAGES INSTRUMENTAL VARIABLE ESTIMATION VOLATILITY ECONOMETRIC ANALYSIS COUNTRY RISK LEVEL OF INCOME FINANCIAL CRISIS VALUE CREDIT STRUCTURAL BREAKS MACROECONOMICS PRUDENTIAL REGULATIONS GOVERNMENT EXPENDITURE EXPENDITURES CAPITAL FLOWS PROPERTIES NUISANCE PARAMETER PRIVATE SECTOR REAL GROSS DOMESTIC PRODUCT FISCAL STANCE EXPANSIONARY FISCAL POLICY PUBLIC DEBT PRIMARY BALANCE FIXED EFFECTS FISCAL SUSTAINABILITY INSURANCE MACROECONOMIC VARIABLES BUSINESS CYCLES CYCLICAL FISCAL POLICY GDP GOODS THEORY INTERNATIONAL MONETARY FUND INVESTMENT RANDOM WALK NEOCLASSICAL MODELS DOMESTIC CREDIT SHARE FISCAL MANAGEMENT FINANCIAL MARKETS FISCAL BALANCE RISK MANAGEMENT ECONOMIC TIME SERIES LENDING CHECK STICKY PRICES CREDIT GROWTH FISCAL BEHAVIOR MACROECONOMIC POLICIES FISCAL DISCIPLINE GDP DEFLATOR OUTCOMES MIDDLE INCOME COUNTRIES PRO-CYCLICAL POLICIES DEVELOPMENT POLICY GROWTH Carneiro, Francisco G. Garrido, Leonardo New Evidence on the Cyclicality of Fiscal Policy
geographic_facet	Latin America & Caribbean Caribbean Latin America
relation	Policy Research Working Paper;No. 7293
description	This paper presents new evidence on the patterns of cyclicality in the fiscal policy stance of developing and industrialized countries over a period of more than three decades covering 180 countries during 1980–2012. First, the paper considers issues of robustness in the choice of the proxy for fiscal cyclicality by using alternative filtering methods to check whether this influences the results and leads to any differences in a country’s reported within-period average, and across-period changes in fiscal stance. Second, a country-specific approach is used to split the sample into sub-periods based on a test for structural break in the series of real gross domestic product per capita. Third, the paper investigates the extent to which countries behave pro-cyclically or counter-cyclically in different phases of the business cycle. In line with earlier findings in the literature, the analysis confirms that there is a causal link running from stronger institutions to less pro-cyclical fiscal policy, even after controlling for the endogeneity of institutions and other determinants of fiscal policy.
format	Working Paper
author	Carneiro, Francisco G. Garrido, Leonardo
author_facet	Carneiro, Francisco G. Garrido, Leonardo
author_sort	Carneiro, Francisco G.
title	New Evidence on the Cyclicality of Fiscal Policy
title_short	New Evidence on the Cyclicality of Fiscal Policy
title_full	New Evidence on the Cyclicality of Fiscal Policy
title_fullStr	New Evidence on the Cyclicality of Fiscal Policy
title_full_unstemmed	New Evidence on the Cyclicality of Fiscal Policy
title_sort	new evidence on the cyclicality of fiscal policy
publisher	World Bank, Washington, DC
publishDate	2015
url	http://documents.worldbank.org/curated/en/2015/06/24596072/new-evidence-cyclicality-fiscal-policy http://hdl.handle.net/10986/22166
_version_	1764450331834449920

New Evidence on the Cyclicality of Fiscal Policy

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