{
  "title": "Measure to Measure: The Effect of Fiscal Policy on Growth and Stability",
  "publication": "IMF Blog, April 15, 2015",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability",
  "canonical": "https://www.imf.org/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability",
  "overlayPath": "/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability/index.md",
  "summary": "Author: Vitor Gaspar",
  "sections": [
    {
      "heading": "Overview and research questions",
      "content": "- Author: Vitor Gaspar\n- Date: April 15, 2015\n- Core questions addressed:\n  - Does fiscal policy respond systematically to economic activity?\n  - Can fiscal policy promote macroeconomic stability?\n  - Does greater stability support stronger growth?\n- Summary answer given: \"The answer is yes on all counts.\""
    },
    {
      "heading": "Novel metric: the fiscal stabilization coefficient (FISCO)",
      "content": "- Definition:\n  - FISCO measures how much a country’s overall budget balance changes in response to a change in economic slack (as measured by the output gap).\n  - Example interpretation: If FISCO is equal to 1 it means that when output falls below potential by 1% of GDP, the overall balance worsens by the same percentage of GDP.\n- Empirical values:\n  - The average FISCO among advanced economies is 0.7.\n  - Cross-country differences are described as considerable.\n  - A referenced top-third FISCO level is about 0.8.\n- Conceptual notes:\n  - The FISCO accounts for the fact that many revenue and expenditure items respond to the state of the economy even if they were designed for other reasons.\n  - Monitoring the relationship between the budget balance and the output gap helps policymakers understand how much their action contributes to output stability and allows cross-country comparisons."
    },
    {
      "heading": "Growth dividends from stabilization",
      "content": "- Mechanism:\n  - Higher FISCO → lower macroeconomic volatility → reduced wasteful fluctuations in employment and growth.\n  - Lower macroeconomic uncertainty → more favorable environment for physical and social capital → higher medium-term growth.\n- Quantified example:\n  - An advanced economy raising its FISCO from the average level (0.7) to that in the top third of countries (about 0.8) would:\n    - Reduce output volatility by about 15 percent.\n    - Deliver a growth dividend of 0.3 percentage points annually.\n- Methodology and caveats:\n  - The Fiscal Monitor provides greater details of the methodology, which attempts to address known challenges with growth regressions.\n  - Findings should be interpreted with caution, as with all econometric results."
    },
    {
      "heading": "Policy implications and practical measures",
      "content": "- Strengthening fiscal frameworks:\n  - Put in place a fiscal framework to manage public finance risks.\n  - Implement well-designed fiscal rules and medium-term frameworks to:\n    - Enable uninterrupted access to borrowing at favorable conditions.\n    - Ensure expenditure control over the entire cycle.\n    - Leave flexibility to respond to output shocks.\n- Promote automatic stabilizers:\n  - Induce rules-like, automatic stabilizing responses to economic developments (e.g., tax payments that move with income, social transfers such as unemployment benefits).\n  - Rationale: Automatic stabilizers operate in real time without political approval or implementation lags, making them an effective way to make fiscal policy stabilizing.\n\nMeasure to Measure: The Effect of Fiscal Policy on Growth and Stability — Vitor Gaspar, April 15, 2015\n\n---\n\n Content in this bundle\n\n- Now Is the Time: Fiscal Policies for Sustainable Growth, Fiscal Monitor, April 2015\n  - Now Is the Time: Fiscal Policies for Sustainable Growth, Fiscal Monitor, April 2015 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Now Is the Time: Fiscal Policies for Sustainable Growth, Fiscal Monitor, April 2015 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Growth Dividend from Stabilizing Fiscal Policies\n- https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-1.jpg\n- https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-2.jpg\n- https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-3.jpg\n- Dams and Dikes for Public Finances\n\nSource: https://www.imf.org/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability"
    }
  ],
  "bullets": [
    "[Markdown version](/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability/index.md)",
    "[Structured JSON version](/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability/index.json)",
    "[Bundle manifest](/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability/bundle-manifest.json)",
    "Authors: Vitor Gaspar",
    "Published: April 15, 2015",
    "Author: Vitor Gaspar",
    "Date: April 15, 2015",
    "Core questions addressed:",
    "Summary answer given: \"The answer is yes on all counts.\"",
    "Definition:",
    "Empirical values:",
    "Conceptual notes:",
    "Mechanism:",
    "Quantified example:",
    "Methodology and caveats:",
    "Strengthening fiscal frameworks:",
    "Promote automatic stabilizers:",
    "**Now Is the Time: Fiscal Policies for Sustainable Growth, Fiscal Monitor, April 2015**",
    "[Growth Dividend from Stabilizing Fiscal Policies](http://blogs.imf.org/2015/04/08/growth-dividend-from-stabilizing-fiscal-policies/)",
    "[https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-1.jpg](https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-1.jpg)",
    "[https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-2.jpg](https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-2.jpg)",
    "[https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-3.jpg](https://www.imf.org/wp-content/uploads/2015/04/fm-fisco-3.jpg)",
    "[Dams and Dikes for Public Finances](http://blogs.imf.org/2015/03/18/dams-and-dikes-for-public-finances/)"
  ],
  "related": [
    {
      "title": "Now Is the Time: Fiscal Policies for Sustainable Growth, Fiscal Monitor, April 2015",
      "role": "document",
      "sourceUrl": "http://www.imf.org/external/pubs/ft/fm/2015/01/pdf/fm1501.pdf",
      "summary": {
        "path": "/external/pubs/ft/fm/2015/01/pdf/fm1501.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/external/pubs/ft/fm/2015/01/pdf/fm1501.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability/index.md",
    "json": "/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability/index.json",
    "bundleManifest": "/en/blogs/articles/2015/04/15/measure-to-measure-the-effect-of-fiscal-policy-on-growth-and-stability/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-08-28T01:44:01.492Z"
}