Fiscal Discourse and Fiscal Policy

Yongquan Cao, Era Dabla-Norris and Enrico Di Gregorio

No 2024/194, IMF Working Papers from International Monetary Fund

Abstract: We study the supply of fiscal ideas leveraging thousands of electoral platforms from 65 countries in the Manifesto Project to link how political parties discuss fiscal policy with fiscal outcomes. We provide three sets of results. First, fiscal discourse has become increasingly favourable to higher government spending since at least the 1990s in advanced and emerging economies and across the political spectrum. This pattern does not track survey trends in voter preferences, suggesting that parties have played a role in shifting the focus of political campaigns to fiscal issues to win over voters. Second, fiscal discourse turns conservative under more adverse fiscal conditions, including in the aftermath of debt surges and after the adoption of fiscal rules, but only to a limited extent. Third, over the medium-run, relative discourse changes in favor of government expansion and away from fiscal restraint are followed by higher fiscal deficits. Together, our results suggest that adverse shifts in the supply of fiscal ideas could add to fiscal pressures over time.

Keywords: Fiscal Discourse; Fiscal Policy; Elections; Manifesto; trend increase; IMF working paper No. 2024/194; survey trend; expansion discourse; Government debt management; Fiscal rules; Emerging and frontier financial markets; Global (search for similar items in EconPapers)
Pages: 60
Date: 2024-09-16
New Economics Papers: this item is included in nep-cdm, nep-ipr and nep-pol
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