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Fiscal policy response to cycles under two regimes: Spain 1950–1998

Stefano Battilossi (), Regina Escario () and James Foreman-Peck

Cliometrica, Journal of Historical Economics and Econometric History, 2013, vol. 7, issue 3, 267-294

Abstract: In the second half of the 20th century, Spain provides a case of political regime change, which according to some political economy models should also lead to a shift in the cyclical nature of fiscal policy. We find that in most of the pre-democratic era, there was a strong procyclical bias to fiscal policy. Eradication began in the last years of the autocratic regime under the influence of fiscal institutional reform and perhaps learning. It was completed after the transition to democracy when countercyclical fiscal policy was reinforced in the late 1980s by membership of the European Exchange Rate Mechanism. This experience, established by two separate econometric identification procedures, as well as a narrative drawing especially upon OECD and EIU reports, runs counter to the predictions of the political economy models of Lane (J Public Econ 87(12):2661–2675, 2003) and Alesina et al. (J Eur Econ Assoc 5:1006–1036, 2008).

Keywords: Fiscal policy; Business cycle; Regime change (search for similar items in EconPapers)
JEL-codes: E32 E62 N14 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Cliometrica, Journal of Historical Economics and Econometric History is currently edited by Claude Diebolt, Dora Costa and Jean-Luc Demeulemeester

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