On the consequences of procyclical fiscal policy

Journal article


McManus, R. and Ozkan, G. 2015. On the consequences of procyclical fiscal policy. Fiscal Studies. 36 (1), pp. 29-50. https://doi.org/10.1111/j.1475-5890.2015.12044.x
AuthorsMcManus, R. and Ozkan, G.
Abstract

There is widespread evidence that procyclical fiscal policies have been prevalent in developing countries and often in some industrial nations. It is therefore surprising that, in contrast to the wealth of studies on the sources of procyclical policy, potential consequences of such
seemingly sub-optimal policies have been largely ignored in the existing literature. By utilizing a comprehensive set of indicators from 114 countries for 1950-2010, we aim to address the following important question: does it matter whether a country adopts a procyclical fiscal policy stance rather than a countercyclical one? Our results produce a resounding `yes' to this question. We find that fiscally procyclical countries have lower rates of economic growth, higher rates of output volatility and higher rates of in
inflation.

Year2015
JournalFiscal Studies
Journal citation36 (1), pp. 29-50
PublisherInstitute for Fiscal Studies
ISSN0143-5671
Digital Object Identifier (DOI)https://doi.org/10.1111/j.1475-5890.2015.12044.x
Publication dates
Print23 Feb 2015
Publication process dates
Deposited16 Dec 2014
Accepted04 Sep 2014
Output statusPublished
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