Financial Cycles and Fiscal Cycles
Agustín Bénétrix () and
Philip Lane ()
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Philip Lane: Central Bank of Ireland, Trinity College Dublin and CEPR
Economic Papers from Trinity College Dublin, Economics Department
There is an extensive literature on the behaviour of fiscal variables vis-a-vis the output cycle. We show that fiscal variables also co-vary with the financial cycle, as captured by fluctuations in the current account balance and credit growth. These financial factors affect fiscal outcomes, over and above their influence on the output cycle. We argue that fiscal surveillance and the design of fiscal rules should pay close attention to the interaction between the financial cycle and the fiscal cycle.
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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep0815
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