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| Author: | Beetsma, R. Giuliodori, M. |
| Title: | Fiscal adjustment to cyclical developments in the OECD: An empirical analysis based on real-time data |
| Journal: | Oxford Economic Papers
2010 : JUL, VOL. 62:3, p. 419-441 |
| Index terms: | oecd fiscal policy planning business cycles |
| Language: | eng |
| Abstract: | This paper explores the determinants of both fiscal plans and their implementation for OECD countries over the period 1995-2006 using real-time data. First, this study estimates standard fiscal rules based on forecasts and then it explores how fiscal policy responds to new information, particularly on business cycle. The findings reveal that planned fiscal policy is a-cyclical for EU countries and counter-cyclical for the other countries. However, the EU countries react pro-cyclically to unexpected changes in the output gap in the implementation stage. The responses of the OECD countries are a-cyclical. Hence, the empirical distinction between the two fiscal stages is crucial. The relatively strong emphasis on ex ante, as opposed to ex post, compliance with fiscal rules seems misguided. |
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