This time truly is different: The cyclical behaviour of fiscal policy during the Covid-19 crisis

Philipp Heimberger

Journal of Macroeconomics, 2023, vol. 76, issue C

Abstract: Fiscal policy was more countercyclical during the Covid-19 crisis than in previous (crisis) episodes. This paper presents empirical evidence in favour of a “this time truly is different” moment based on analysing the cyclical behaviour of fiscal policy for 28 advanced economies over 1995–2021. Discretionary fiscal policy during the Covid-19 crisis (2020–2021) did more to counteract the downturn – especially in the Eurozone –, as we do not find comparable evidence for countercyclicality during the financial crisis or Euro crisis. Automatic fiscal stabilisers, the non-discretionary domain of fiscal policy, significantly contributed to countercyclical stabilisation during the pandemic.

Keywords: Fiscal policy; Covid-19 crisis; Financial crisis; Euro crisis; Automatic stabilisers; Discretionary fiscal policy (search for similar items in EconPapers)
JEL-codes: E62 H11 H61 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:76:y:2023:i:c:s0164070423000228

DOI: 10.1016/j.jmacro.2023.103522

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