On the Consequences of Pro-Cyclical Fiscal Policy

F. Gulcin Ozkan, Richard McManus

Research output: Contribution to journalArticlepeer-review


There is widespread evidence that pro-cyclical fiscal policies have been prevalent in developing countries and often in some industrial nations. It is therefore surprising that, in contrast to the wealth of studies on the sources of pro-cyclical policy, potential consequences of such seemingly suboptimal policies have been largely ignored in the existing literature. By utilising a comprehensive set of indicators from 114 countries for 1950–2010, we aim to address the following important question: does it matter whether a country adopts a pro-cyclical fiscal policy stance rather than a counter-cyclical one? Our results produce a resounding ‘yes’ to this question. We find that fiscally pro-cyclical countries have lower rates of economic growth, higher rates of output volatility and higher rates of inflation.
Original languageEnglish
Pages (from-to)29-50
JournalFiscal Studies
Issue number1
Early online date23 Feb 2015
Publication statusPublished - Mar 2015


  • Cyclicality of fiscal policy;
  • Inflation
  • Growth

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