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RESEARCH PRODUCT

The Determinants of the Volatility of Fiscal Policy Discretion

Ricardo M. SousaLuca Agnello

subject

MacroeconomicsEconomics and Econometricsmedia_common.quotation_subjectfiscal policy discretionvolatilitySocial SciencesmacroeconomyExchange rateInstitutional frameworAccountingFiscal policy discretion0502 economics and businessEconomics050207 economicsMacroeconomyE31050205 econometrics media_common05 social sciencesCiências Sociais::Economia e GestãoSettore SECS-P/02 Politica Economicapolitical instabilityinstitutional frameworkDiscretionPolitical instabilityFiscal unionDemocracyHigh inflationFiscal policyVolatility8. Economic growth:Economia e Gestão [Ciências Sociais]Volatility (finance)E63FinancePanel data

description

We investigate the determinants of the volatility of fiscal policy discretion. Using a linear dynamic panel dataset model for 104 countries from 1980 to 2006 and a system-GMM estimator,we find that more government instability, less democracy and presidentialist systems increase the volatility of the discretionary component of fiscal policy. Additionally, we show that countries with a larger size, a smaller degree of financial openness, and a stable exchange rate system are more insured against the uncertainty about the conduct of fiscal policy. Our results are robust to various regional dummy variables, diferent sub-sets of countries and the presence of high inflation and crisis episodes.

yearjournalcountryeditionlanguage
2014-03-01
10.1111/j.1475-5890.2014.12024.xhttp://hdl.handle.net/10447/99931