Redistributive Fiscal Policies and Business Cycles in Emerging Economies

Amanda Michaud and Jacek Rothert

No 1709, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: Government expenditures are pro-cyclical in emerging markets and counter-cyclical in developed economies. We show this pattern is driven by differences in social transfers. Transfers are more counter-cyclical and comprise a larger portion of spending in developed economies compared to emerging. In contrast, government expenditures on goods and services are quite similar across the two. In a small open economy model, we find disparate social transfer policies can account for more than a half of the excess volatility of consumption relative to output in emerging economies. We analyze how differences in tax policy and the nature of underlying inequality amplify or mitigate this result.

Keywords: Fiscal Policy; Open Economy Macroeconomics; Emerging Markets; Business Cycles (search for similar items in EconPapers)
JEL-codes: E3 E6 F4 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2017-05-24
New Economics Papers: this item is included in nep-dcm, nep-dge, nep-mac and nep-opm
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Redistributive fiscal policies and business cycles in emerging economies (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1709

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DOI: 10.26509/frbc-wp-201709

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