Cargando…
Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions
We explore under different exchange rate regimes how fiscal rules and institutions can reduce the procyclical stance of fiscal policy (i.e. how government spending responds to GDP fluctuations). We construct a fiscal rules index which is a composite index measuring the overall strength of fiscal rul...
Autores principales: | , |
---|---|
Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Palgrave Macmillan UK
2022
|
Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9648450/ https://www.ncbi.nlm.nih.gov/pubmed/36408198 http://dx.doi.org/10.1057/s41294-022-00197-0 |
_version_ | 1784827590651936768 |
---|---|
author | Keita, Kady Turcu, Camelia |
author_facet | Keita, Kady Turcu, Camelia |
author_sort | Keita, Kady |
collection | PubMed |
description | We explore under different exchange rate regimes how fiscal rules and institutions can reduce the procyclical stance of fiscal policy (i.e. how government spending responds to GDP fluctuations). We construct a fiscal rules index which is a composite index measuring the overall strength of fiscal rules in a country at a given time. We use it in a dynamic model with a GMM estimator, for a panel of 153 countries over the period 1993–2015. We find that under fixed exchange rate regimes, while better institutions can reduce procyclicality, rules increase it or do not affect it. This result suggests that under fixed exchange rate regimes, a focus should be put on stronger institutional quality rather than on the adoption of fiscal rules. However, under flexible exchange rate regimes, we find that institutions and rules are complementary in reducing procyclicality. Rules help reduce procyclicality and are more effective, in particular, when institutions are stronger. Our results are robust to different specifications as well as to the use of alternative variables of institutional quality. |
format | Online Article Text |
id | pubmed-9648450 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2022 |
publisher | Palgrave Macmillan UK |
record_format | MEDLINE/PubMed |
spelling | pubmed-96484502022-11-14 Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions Keita, Kady Turcu, Camelia Comp Econ Stud Article We explore under different exchange rate regimes how fiscal rules and institutions can reduce the procyclical stance of fiscal policy (i.e. how government spending responds to GDP fluctuations). We construct a fiscal rules index which is a composite index measuring the overall strength of fiscal rules in a country at a given time. We use it in a dynamic model with a GMM estimator, for a panel of 153 countries over the period 1993–2015. We find that under fixed exchange rate regimes, while better institutions can reduce procyclicality, rules increase it or do not affect it. This result suggests that under fixed exchange rate regimes, a focus should be put on stronger institutional quality rather than on the adoption of fiscal rules. However, under flexible exchange rate regimes, we find that institutions and rules are complementary in reducing procyclicality. Rules help reduce procyclicality and are more effective, in particular, when institutions are stronger. Our results are robust to different specifications as well as to the use of alternative variables of institutional quality. Palgrave Macmillan UK 2022-11-10 /pmc/articles/PMC9648450/ /pubmed/36408198 http://dx.doi.org/10.1057/s41294-022-00197-0 Text en © Association for Comparative Economic Studies 2022, Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic. |
spellingShingle | Article Keita, Kady Turcu, Camelia Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions |
title | Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions |
title_full | Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions |
title_fullStr | Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions |
title_full_unstemmed | Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions |
title_short | Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions |
title_sort | promoting counter-cyclical fiscal policy: fiscal rules versus institutions |
topic | Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9648450/ https://www.ncbi.nlm.nih.gov/pubmed/36408198 http://dx.doi.org/10.1057/s41294-022-00197-0 |
work_keys_str_mv | AT keitakady promotingcountercyclicalfiscalpolicyfiscalrulesversusinstitutions AT turcucamelia promotingcountercyclicalfiscalpolicyfiscalrulesversusinstitutions |