Institutional Affiliation: Victoria University of Wellington
|Fiscal Space and Government-Spending & Tax-Rate Cyclicality Patterns: A Cross-Country Comparison, 1960-2016|
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This paper compares fiscal cyclicality across advanced and developing countries, geographic regions as well as income levels over 1960–2016 period, then identifies factors that explain countries’ government spending and tax-policy cyclicality. Public debt/tax base ratio provides a more robust explanation for government-spending cyclicality than public debt/output ratio but the reverse is true when capital investment is accounted for in government spending. On average, a more indebted (relative to tax base) government spends more in good times and cuts back spending indifferently compared with a low-debt country in bad times. We also find that country’s sovereign wealth fund has a countercyclical effect in our estimation. Finally, the analysis depicts a significant economic impact of an end...
Published: Joshua Aizenman & Yothin Jinjarak & Hien Thi Kim Nguyen & Donghyun Park, 2019. "Fiscal Space and Government-Spending & Tax-Rate Cyclicality Patterns: A Cross-Country Comparison, 1960–2016," Journal of Macroeconomics, .