Boom-Bust Phases in Asset Prices and Fiscal Policy Behavior

Albert Jaeger and Ludger Schuknecht ()

No 04/54, IMF Working Papers from International Monetary Fund

Abstract: Boom and bust phases in asset prices have become a pervasive feature of macroeconomic developments in many advanced economies. This paper studies fiscal policy during boom-bust phases in asset prices and draws several conclusions. First, expansions and contractions in economic activity during such boom-bust phases tend to be highly persistent, cyclical turning points are harder to forecast, and the margins of error for output gap estimates can be large. Second, conventional estimates of revenue elasticities seem not to allow an accurate assessment of the fiscal stance and of the strength of underlying fiscal positions during boom-bust phases. And third, boom-bust phases tend to exacerbate already existing procyclical policy biases, as well as political-economy biases, toward higher spending and public debt ratios.

Keywords: Business cycles; Fiscal policy; Asset prices; Public debt; Budget deficits (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pbe
Date: 2004-04-12
View list of references View citations in EconPapers

Downloads: (external link)
http://www.imf.org/external/pubs/ft/wp/2004/wp0454.pdf (application/pdf)

Related works:
Journal Article: Boom-Bust Phases in Asset Prices and Fiscal Policy Behavior (2007)
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: http://EconPapers.repec.org/RePEc:imf:imfwpa:04/54

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund
Address: International Monetary Fund, Washington, DC USA
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().