De facto Fiscal Space and Fiscal Stimulus: Definition and Assessment

Joshua Aizenman and Yothin Jinjarak

No 16539, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We define the notion of a 'de facto fiscal space' of a country as the inverse of the tax-years it would take to repay the public debt. Specifically, we measure the outstanding public debt relative to the de facto tax base, where the latter measures the realized tax collection, averaged across several years to smooth for business cycle fluctuations. We apply this concept to account for the cross-country variation in the fiscal stimulus associated with the global crisis of 2009-2010. We find that greater de facto fiscal space prior to the global crisis, higher GDP/capita, higher financial exposure to the US, and lower trade openness were associated with a higher fiscal stimulus/GDP during 2009-2010. Joint estimation indicates that higher trade openness was associated with lower fiscal stimulus and higher depreciation rate during 2009-2010.

JEL-codes: E62 F42 (search for similar items in EconPapers)
Date: 2010-11
Note: ITI
References: View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Working Paper: De facto Fiscal Space and Fiscal Stimulus: Definition and Assessment (2010)
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