 Financial development, financial instability, and fiscal policy volatility: International evidenceYong Ma and Lin Lv The North American Journal of Economics and Finance, 2023, vol. 64, issue C Abstract: This paper investigates the effects of financial development and financial instability on fiscal policy volatility using system GMM estimator based on panel data of 96 countries from 1990 to 2019. We find that higher levels of financial development are associated with lower fiscal policy volatility, but an increase in financial instability would lead to greater volatility in fiscal policy. We also find that the harmful effect of financial instability on fiscal policy conduct would be alleviated in the normal phase of the financial cycle but would be magnified during expansionary, recessionary and crisis periods. This paper extends the existing literature by highlighting the role of finance in fiscal policy volatility, where a large and stable financial system is conducive to the smooth conduct of fiscal policy. Keywords: Financial development; Financial instability; Financial cycle; Fiscal policy volatility (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:64:y:2023:i:c:s106294082200208x DOI: 10.1016/j.najef.2022.101873 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.