The Economic Impact of Fiscal Policy Uncertainty: Evidence from a New Cross-Country Database
IMF Working Papers, September 27, 2024
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- The Economic Impact of Fiscal Policy Uncertainty: Evidence from a New Cross-Country Database
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Bibliographic details
- Authors: Gee Hee Hong, Shikun (Barry) Ke, Anh D. M. Nguyen
- Published: September 27, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400288128.001
Summary
- Fiscal policy uncertainty (FPU) is defined as ambiguity in government spending and tax plans, as well as in public debt valuation.
- The authors construct a novel database of news-based fiscal policy uncertainty for 189 countries.
- The paper identifies a subset of fiscal uncertainty events that generate global attention, termed “global fiscal policy uncertainty.”
- Publication details:
- By Gee Hee Hong, Shikun (Barry) Ke, Anh D. M. Nguyen
- September 27, 2024
- Pages: 58
- Volume: 2024
- Issue: 209
- Series: Working Paper No. 2024/209
- DOI: https://doi.org/10.5089/9798400288128.001
- Stock No: WPIEA2024209
- ISBN: 9798400288128
- ISSN: 1018-5941
Main empirical findings
- Global fiscal policy uncertainty has contractionary effects on real activity:
- It reduces industrial production in both advanced and emerging market economies.
- Its impacts are greater than those of country-specific fiscal policy uncertainty.
- Global FPU affects financial conditions:
- It raises sovereign borrowing costs.
- It generates synchronous movements in global financial variables.
- These financial effects persist even after accounting for US monetary policy shocks.
Data and measurement
- The study builds a cross-country, news-based FPU index covering 189 countries.
- The database explicitly tracks events that attract global attention and classifies them under “global fiscal policy uncertainty.”
Research scope and methods (as described)
- The analysis contrasts global fiscal policy uncertainty with country-specific fiscal policy uncertainty to identify differential economic and financial impacts.
- The study accounts for US monetary policy shocks when assessing the transmission of global FPU to global financial variables.
Subjects and keywords
- Subject: Debt default, Expenditure, External debt, Industrial production, Production, Public debt
- Keywords: Debt default, Fiscal policy uncertainty, FPU index, Global, impact of Fiscal Policy Uncertainty, Industrial production, news-based uncertainty, novel database, propagation of global shocks, uncertainty events, uncertainty indicator, VAR
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