Fiscal Policy Discretion, Private Spending, and Crisis Episodes

Luca Agnello (), Davide Furceri and Ricardo Sousa

Working papers from Banque de France

Abstract: In this paper, we assess the impact of fiscal policy discretion on economic activity in the short and medium-term. Using a panel of 132 countries from 1960 to 2008, we find that fiscal policy discretion provides a net stimulus to the economy in the short-run and crowding-in effects are amplified once crisis episodes are controlled for in particular, banking crises - giving a great scope for fiscal policy stimulus packages. However, crowding-out effects take over in the long-run especially, in the case of debt crises -, in line with the concerns about long-term debt sustainability.

Keywords: Fiscal policy discretion; GDP growth; private consumption; private investment; crowding-in; crowding-out. (search for similar items in EconPapers)
JEL-codes: E0 E6 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2011
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Fiscal Policy Discretion, Private Spending, and Crisis Episodes (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:354

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