On the consequences of procyclical fiscal policy

McManus, R. and Ozkan, G. (2015) On the consequences of procyclical fiscal policy. Fiscal Studies, 36 (1). pp. 29-50. ISSN 0143-5671.

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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.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions > HC0059 Economic development
Divisions: Faculty of Social and Applied Sciences > The Business School
Depositing User: Richard McManus
Date Deposited: 16 Dec 2014 14:14
Last Modified: 29 Sep 2016 11:38
URI: https://create.canterbury.ac.uk/id/eprint/12982

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Last edited: 29/06/2016 12:23:00