Cyclical sensitivity of fiscal policies based on real-time data

Lorenzo Forni and Sandro Momigliano

No 540, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper examines the information-related problems associated with the analysis of fiscal policies, an issue recently analyzed in connection with monetary policies but largely ignored in the literature on budgetary actions. The results indicate that reliance on the information actually available to policy-makers in real-time is important for the assessment of past policies. We show that estimating fiscal policy rules based on ex post revised data tends to provide a misleading assessment of the sensitivity of discretionary policies to cyclical conditions. The results also suggest that part of the problems the Stability and Growth Pact encountered may have come from a misjudgment of cyclical conditions in some European countries in recent years.

Keywords: Real-time information; OECD countries; stabilization policies; fiscal policy rules (search for similar items in EconPapers)
JEL-codes: E61 E62 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-eec, nep-mac and nep-pbe
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Citations: View citations in EconPapers (90)

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Working Paper: Cyclical sensitivity of fiscal policies based on real-time data (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_540_04

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