Procyclicality of Fiscal Policy in Emerging Countries: The Cycle is the Trend

Michel Strawczynski, Joseph Zeira

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review


This paper uses the Aguiar and Gopinath (2007) methodology in order to estimate whether 'the cycle is the trend' in 23 emerging markets and 22 OECD economies. These estimates are then used to test whether procyclical fiscal policy in emerging countries is due to persistent shocks to per-capita GDP. We find support for this hypothesis. While both developed and emerging countries have a procyclical for investment expenditure, procyclicality is evident in emerging countries also for government consumption and transfers. Over the period of increasing globalization after the nineties, there are signs of a reduction in the extent of procyclical expenditure policy in emerging countries. We also find, that in countries with high levels of foreign direct investment, procyclicality is milder.
Original languageAmerican English
Title of host publicationFiscal policy and macroeconomic performance
Editors Jordi Gali , Luis Felipe Cespedes
Place of PublicationSantiago, Chile
PublisherBanco Central Chile
Number of pages40
ISBN (Print)9789567421374, 9567421382
StatePublished - 2011

Publication series

NameSeries on central banking, analysis, and economic policies
ISSN (Print)0717-6686

Bibliographical note

"The articles presented in this volume are revised versions of the papers presented at the Fourteenth Annual Conference of the Central Bank of Chile on Fiscal Policy and Macroeconomic Performance held in Santiago on 21-22 October 2010"-Page [i].


  • procyclical fiscal policy
  • emerging countries
  • cycle is the trend


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