Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World

A large and growing literature has argued that industrialized and developing countries behave very differently in relation to their fiscal policy stances over the business cycle. In this paper, the authors provide new evidence on the cyclicality of...

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Main Authors:	Carneiro, Francisco G., Garrido, Leonardo
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	fiscal policy pro-cyclical fiscal policy business cycles
Online Access:	http://documents.worldbank.org/curated/en/2016/10/26853952/revisiting-evidence-cyclicality-fiscal-policy-across-world http://hdl.handle.net/10986/25285

id	okr-10986-25285
recordtype	oai_dc
spelling	okr-10986-252852021-05-25T08:52:43Z Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World Carneiro, Francisco G. Garrido, Leonardo fiscal policy pro-cyclical fiscal policy business cycles A large and growing literature has argued that industrialized and developing countries behave very differently in relation to their fiscal policy stances over the business cycle. In this paper, the authors provide new evidence on the cyclicality of fiscal policy across industrialized and developing countries. The authors sample includes 180 countries, of which 134 are developing countries and 46 are high income countries over the period 1980-2012. The authors follow the methodology of Frankel et al. (2013) but at the same time introduce three innovations to the empirical approach. This paper is organized as follows : After Introduction, Section two discusses issues associated with the choice of filter to smooth the proxy variable for fiscal cyclicality while Section three estimates our own Graduating Class under different filtering methods and a country-specific approach to split the sample into two sub-periods. Section four presents an analysis of how the countries in our sample behave over the business cycle. Section five discusses our findings on the empirical determinants of fiscal cyclicality while Section six explores endogeneity issues. Section 7 presents concluding remarks confirming earlier findings in the literature on the causal link between institutional quality and a less pro-cyclical fiscal stance and suggesting policy directions that could be useful to countries interested in strengthening their fiscal positions and becoming better equipped to adopt counter-cyclical fiscal policies 2016-10-27T19:52:43Z 2016-10-27T19:52:43Z 2016-10 Working Paper http://documents.worldbank.org/curated/en/2016/10/26853952/revisiting-evidence-cyclicality-fiscal-policy-across-world http://hdl.handle.net/10986/25285 English en_US MFM Discussion Paper No. 16; CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Working Paper
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	fiscal policy pro-cyclical fiscal policy business cycles
spellingShingle	fiscal policy pro-cyclical fiscal policy business cycles Carneiro, Francisco G. Garrido, Leonardo Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World
relation	MFM Discussion Paper No. 16;
description	A large and growing literature has argued that industrialized and developing countries behave very differently in relation to their fiscal policy stances over the business cycle. In this paper, the authors provide new evidence on the cyclicality of fiscal policy across industrialized and developing countries. The authors sample includes 180 countries, of which 134 are developing countries and 46 are high income countries over the period 1980-2012. The authors follow the methodology of Frankel et al. (2013) but at the same time introduce three innovations to the empirical approach. This paper is organized as follows : After Introduction, Section two discusses issues associated with the choice of filter to smooth the proxy variable for fiscal cyclicality while Section three estimates our own Graduating Class under different filtering methods and a country-specific approach to split the sample into two sub-periods. Section four presents an analysis of how the countries in our sample behave over the business cycle. Section five discusses our findings on the empirical determinants of fiscal cyclicality while Section six explores endogeneity issues. Section 7 presents concluding remarks confirming earlier findings in the literature on the causal link between institutional quality and a less pro-cyclical fiscal stance and suggesting policy directions that could be useful to countries interested in strengthening their fiscal positions and becoming better equipped to adopt counter-cyclical fiscal policies
format	Working Paper
author	Carneiro, Francisco G. Garrido, Leonardo
author_facet	Carneiro, Francisco G. Garrido, Leonardo
author_sort	Carneiro, Francisco G.
title	Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World
title_short	Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World
title_full	Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World
title_fullStr	Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World
title_full_unstemmed	Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World
title_sort	revisiting the evidence on the cyclicality of fiscal policy across the world
publisher	World Bank, Washington, DC
publishDate	2016
url	http://documents.worldbank.org/curated/en/2016/10/26853952/revisiting-evidence-cyclicality-fiscal-policy-across-world http://hdl.handle.net/10986/25285
_version_	1764458850414493696

Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World

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