Search results for "fiscal"

HOW DO FISCAL CONSOLIDATION AND FISCAL STIMULI IMPACT ON THE SYNCHRONIZATION OF BUSINESS CYCLES?

2016

Using quarterly data for a panel of advanced economies, we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked. We also find: (i) some evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii) a positive effect of bilateral trade on the synchronization of business cycles. Global factors, such as a rise in global risk aversion and uncertainty and a reversal of nonstandard expansionary monetary policy, can also reduce the degree of co-movement of busi…

The relationship between debt level and fiscal sustainability in organization for economic cooperation and development countries

2014

In this article we unify the traditional approaches to testing for fiscal sustainability considering the stock-flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 Organization for Economic Cooperation and Development (OECD) countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock-flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simulta…

Searching for Threshold Effects in the Evolution of Budget Deficits: An Application to the Spanish Case

2004

Abstract In this paper, we use recent developments on threshold autoregressive (TAR) models that allow us to derive endogenously threshold effects in the evolution of the Spanish budget deficit. Specifically, a mean-reverting dynamic behaviour of the budget deficit should be expected once such threshold is reached.

Discretionary vs nondiscretionary in fiscal mechanism – non-automatic fiscal stabilisers vs automatic fiscal stabilisers

2015

The goal of the present study is to increase the intelligibility of macroeconomic phenomena triggered by governmental intervention in economy by means of fiscal policies. During cyclical movements, fiscal policy can play an important role in order to help stabilise the economy. But discretionary policy usually implies implementation lags and is not automatically reversed when economic conditions change. In contrast, automatic fiscal stabilisers (SFA) ensure a prompter, and self-correcting fiscal response. The present study aims to tackle the topic of discretionary vs nondiscretionary characteristic of fiscal stabilisers (SF). In this context, the scope of the research undertaking is to laun…

Is the budget deficit sustainable when fiscal policy is non-linear? The case of Spain

2006

In this paper, we re-examine the long-run sustainability of budget deficits, when fiscal policy is conducted as a non-linear process. Our empirical methodology makes use of recent developments on threshold cointegration that consider the possibility of a non-linear relationship between government expenditures and revenues. The analysis is applied to the case of Spain, a country that has recently accomplished an important fiscal consolidation. Overall, our results suggest the presence of significant non-linear effects in Spanish fiscal policy, so that fiscal authorities would cut deficits only if they are ‘large’, which would assure in turn their long-run sustainability.

Deficit sustainability, and monetary versus fiscal dominance: The case of Spain, 1850–2000

2014

Abstract In this paper, we provide a test of the sustainability of the Spanish government deficit over the period 1850–2000, emphasizing the role played by monetary and fiscal dominance in order to get fiscal solvency. Since the condition of fiscal solvency was satisfied, government deficit would have been sustainable along the sample period. In addition, the whole period can be characterized as one of fiscal dominance.

Fiscal impact of the migration phenomenon

2019

Fiscal sustainability in EMU countries: A continued fiscal commitment?

2017

Abstract The aim of this paper is to study the sustainability of public finances in the Eurozone particularly after the 2007 financial crisis. This paper goes beyond the standard analysis of the univariate properties of the fiscal variables through the estimation of a time-varying fiscal reaction function on a 11-country panel for a period spanning from 1970 to 2014. Even if panel unit root or stationary tests may provide a rough first insight on the sustainability of the public finances, they fail to highlight the adjustment mechanisms to debt overhang in recent years. The main advantage of our empirical approach is that it clearly captures the government’s dynamic response to debt accumul…

How best to measure discretionary fiscal policy? Assessing its impact on private spending

2013

We develop a novel empirical approach to assess the effect of discretionary fiscal policy on private spending consisting of three stages: 1) extract the discretionary component of fiscal policy by estimating a fiscal policy rule; 2) use the residuals of the first-stage regression to investigate the existence of crowding-in and/or crowding-out effects both in the short and the medium term; and 3) condition the response of private spending on a set of country characteristics. We find that an expansion in discretionary fiscal policy boosts growth in the short term, but is detrimental in the medium term. In addition, the empirical findings suggest that the effect of discretionary fiscal policy …

Balance of payments crises and fiscal adjustment measures

1991

A model with optimizing firms and consumers is used to explore the effects of unannounced and preannounced fiscal adjustment policies that are intended to prevent an impending balance of payments crisis. It is shown that preannouncement unambiguously raises the required fiscal adjustment effort so that, from the government's point of view, “cold turkey” is the preferable policy. The effect of preannouncement on the private sector's adjustment cost is ambiguous since preannouncement induces an externality which may either benefit or harm the private sector, depending on the nature of the measure that is preannounced.