On the Consequences of Pro-Cyclical Fiscal Policy

Research output: Contribution to journalArticle

Author(s)

Department/unit(s)

Publication details

JournalFiscal Studies
DateE-pub ahead of print - 23 Feb 2015
DatePublished (current) - Mar 2015
Issue number1
Volume36
Pages (from-to)29-50
Early online date23/02/15
Original languageEnglish

Abstract

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.

    Research areas

  • Cyclicality of fiscal policy;, Inflation, Growth

Discover related content

Find related publications, people, projects, datasets and more using interactive charts.

View graph of relations