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Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-cyclical?

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  • Balázs Égert

    (OECD)

Abstract

This paper analyses the reaction of fiscal policy to the cycle in OECD countries. The results suggest that while overall government balances were counter-cyclical in the past and more so in economic downturns than in upswings, discretionary fiscal policy was neutral on average. However, discretionary fiscal policy appears to react to the cycle in a non-linear fashion: fiscal policy in countries with high public debt and high government deficits tends to be pro-cyclical, while countries that have low public debt and that have surpluses are more likely to conduct a counter-cyclical fiscal policy. The paper also finds that asset prices have a significant impact on government balances. La réaction de la politique budgétaire au cycle dans les pays de l'OCDE : A-t-elle été procyclique ou contracyclique ? Ce document analyse la réaction de la politique budgétaire au cycle dans les pays de l’OCDE. Les résultats montrent que le solde budgétaire global a été contracyclique dans le passé et encore plus en période de ralentissement économique qu’en période d’expansion, mais que les mesures budgétaires discrétionnaires ont eu en moyenne un caractère acyclique. Ce constat s’explique par les réactions non linéaires au cycle : dans les pays où la dette publique et le déficit budgétaire sont élevés, la politique budgétaire à tendance à réagir de façon procyclique au cycle, alors que dans les pays à faible dette publique et à excédent budgétaire, la politique budgétaire sera plus probablement contracyclique. Comme le montre également ce document, les plans budgétaires ne sont pas extrêmement différents des résultats budgétaires, et les prix des actifs n’ont pas un impact sensible sur le solde budgétaire.

Suggested Citation

  • Balázs Égert, 2010. "Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-cyclical?," OECD Economics Department Working Papers 763, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:763-en
    DOI: 10.1787/5kmft7pthb27-en
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    More about this item

    Keywords

    contracyclique; counter-cyclicality; fiscal policy; OECD countries; pays membres de l'OCDE; politique budgétaire; pro-cyclicality; procyclique;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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