Counter-cyclical Fiscal Policy in Developed Countries: Does Governance Hinder?

Nguyen Van Bon

Prague Economic Papers, 2022, vol. 2022, issue 6, 482-508

Abstract: Fiscal policy is an effective instrument in helping governments in developed countries overcome a recession with a high unemployment rate or a hot economy with a high inflation rate to keep the economy on a stable path. Does governance contribute significantly to keeping this goal in these countries? The study looks for an answer by empirically investigating the role of governance in the output gap - fiscal policy relationship for a group of 27 developed countries between 2002 and 2019. It employs the difference GMM Arellano-Bond estimators and the PMG estimator for estimation and robustness check. The results provide some interesting findings. Firstly, both public spending and government revenue are counter-cyclical, confirming the counter-cyclical fiscal policy in developed countries. Secondly, governance hinders the counter-cyclical fiscal policy. The findings imply some crucial policies for governments in developed countries in running the fiscal policy.

Keywords: Counter-cyclical fiscal policy; governance; developed countries (search for similar items in EconPapers)
JEL-codes: E32 E62 H60 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://pep.vse.cz/doi/10.18267/j.pep.814.html (text/html)
http://pep.vse.cz/doi/10.18267/j.pep.814.pdf (application/pdf)
free of charge

Related works:
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: https://EconPapers.repec.org/RePEc:prg:jnlpep:v:2022:y:2022:i:6:id:814:p:482-508

Ordering information: This journal article can be ordered from
Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic
http://pep.vse.cz

DOI: 10.18267/j.pep.814

Access Statistics for this article

Prague Economic Papers is currently edited by Klára Pavlová

More articles in Prague Economic Papers from Prague University of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Stanislav Vojir ().