Revisiting the Countercyclicality of Fiscal Policy

IMF Working Papers, April 29, 2023

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Revisiting the Countercyclicality of Fiscal Policy

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Bibliographic details

• Authors: João Tovar Jalles, Youssouf Kiendrebeogo, Waikei R Lam, Roberto Piazza
• Published: April 29, 2023
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9798400240683.001

Overview and dataset

• 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.
• Uses time-varying measures of fiscal stabilization and pays special attention to potential endogenity issues.
• Allows analysis that accounts for both country-specific as well as global factors.

Research focus and methodology

• Examines key determinants of countercyclicality of fiscal policy with a focus on:
  • severe crises,
  • informality,
  • financial development,
  • governance.
• Distinguishes discretionary and automatic components of fiscal policy.
• Employs empirical specifications with endogeneity checks; results reported as robust to various specifications and endogeneity checks.

Main empirical findings

• Fiscal policy tends to be more counter-cyclical during severe crises than typical recessions, especially for advanced economies.
• Fiscal counter-cyclicality has increased over time for many economies over the last two decades.
• Discretionary and automatic countercyclicality:
  • both strong in advanced economies,
  • acyclical (at times procyclical) in low-income countries.
• Fiscal countercyclicality operates primarily through the expenditure channel, particularly for social benefits.
• Better financial development, larger government size and stronger institutional quality are associated with larger countercyclical effects of fiscal policy.

Key statistics and publication metadata

• Authors: João Tovar Jalles, Youssouf Kiendrebeogo, Waikei Raphael Lam, Roberto Piazza
• Date: April 29, 2023
• Pages: 31
• Volume: 2023
• Issue: 089
• Series: Working Paper No. 2023/089
• DOI: https://doi.org/10.5089/9798400240683.001
• Stock No: WPIEA2023089
• ISBN: 9798400240683
• ISSN: 1018-5941

IMF Working Paper — Revisiting the Countercyclicality of Fiscal Policy (April 29, 2023) by João Tovar Jalles, Youssouf Kiendrebeogo, Waikei Raphael Lam, and Roberto Piazza

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