Fiscal Stimulus and Credibility in Emerging Countries

Magda Kandil and Hanan Morsy

Eastern Economic Journal, 2014, vol. 40, issue 3, 420-439

Abstract: Across a sample of 34 emerging countries, the evidence shows the frequent existence of a pro-cyclical fiscal impulse. However, the scope for counter-cyclical policy increases with the availability of international reserves, as it enhances credibility and mitigates concerns about the effect of expansionary fiscal policy on the cost of borrowing and debt service. The paper also examines the effectiveness of the fiscal policy in emerging countries in the short run and long run and its underlying conditions, which does not appear to be uniform.

Date: 2014
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Working Paper: Fiscal Stimulus and Credibility in Emerging Countries (2010)
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