Challenges of Fiscal Policy in Emerging and Developing Economies

Raju Huidrom (), Ayhan Kose and Franziska Ohnsorge

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: This paper presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. These economies built fiscal space in the run-up to the Great Recession of 2008-09, which was then used for stimulus. This reflects a more general trend over the past three decades, where availability of fiscal space has been associated with increasingly countercyclical (or less procyclical) fiscal policy. However, fiscal space has shrunk since the Great Recession and has not returned to pre-crisis levels. Emerging and developing economies face downside risks to growth and prospects of rising financing costs. In the event that these cause a sharp cyclical slowdown, policymakers may need to employ fiscal policy as a possible tool for stimulus. An important prerequisite for fiscal policy to be effective is that these economies have the necessary fiscal space to employ countercyclical policies. Over the medium-term, credible and well-designed institutional arrangements, such as fiscal rules, stabilization funds, and medium-term expenditure frameworks, can help build fiscal space and strengthen policy outcomes.

Keywords: Fiscal space; fiscal policy; developing economies; growth slowdown; fiscal rules; stabilization funds; expenditure frameworks (search for similar items in EconPapers)
JEL-codes: E62 H50 H60 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-06
New Economics Papers: this item is included in nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1604.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1604.pdf [301 Moved Permanently]--> https://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1604.pdf)

Related works:
Journal Article: Challenges of Fiscal Policy in Emerging and Developing Economies (2018)
Working Paper: Challenges of Fiscal Policy in Emerging and Developing Economies (2016)
Working Paper: Challenges of fiscal policy in emerging and developing economies (2016)
Working Paper: Challenges of fiscal policy in emerging and developing economies (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:koc:wpaper:1604

Access Statistics for this paper

More papers in Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Sumru Oz ().