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

Michel Strawczynski; Joseph Zeira

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

Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review

Abstract

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 language	American English
Title of host publication	Fiscal policy and macroeconomic performance
Editors	Jordi Gali , Luis Felipe Cespedes
Place of Publication	Santiago, Chile
Publisher	Banco Central Chile
Pages	427-466
Number of pages	40
ISBN (Print)	9789567421374, 9567421382
State	Published - 2011

Publication series

Name	Series on central banking, analysis, and economic policies
Volume	17
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].

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 17 Partnerships for the Goals

Keywords

procyclical fiscal policy
emerging countries
cycle is the trend

Access to Document

https://www.bcentral.cl/contenido/-/detalle/volumen-17-fiscal-policy-and-macroeconomic-performance-4License: Unspecified

Cite this

Strawczynski, M., & Zeira, J. (2011). Procyclicality of Fiscal Policy in Emerging Countries: The Cycle is the Trend. In J. Gali , & L. F. Cespedes (Eds.), Fiscal policy and macroeconomic performance (pp. 427-466). (Series on central banking, analysis, and economic policies; Vol. 17). Banco Central Chile. https://www.bcentral.cl/contenido/-/detalle/volumen-17-fiscal-policy-and-macroeconomic-performance-4

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abstract = "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.",

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Strawczynski, M & Zeira, J 2011, Procyclicality of Fiscal Policy in Emerging Countries: The Cycle is the Trend. in J Gali & LF Cespedes (eds), Fiscal policy and macroeconomic performance . Series on central banking, analysis, and economic policies, vol. 17, Banco Central Chile, Santiago, Chile , pp. 427-466. <https://www.bcentral.cl/contenido/-/detalle/volumen-17-fiscal-policy-and-macroeconomic-performance-4>

Procyclicality of Fiscal Policy in Emerging Countries: The Cycle is the Trend. / Strawczynski, Michel ; Zeira, Joseph.
Fiscal policy and macroeconomic performance . ed. / Jordi Gali ; Luis Felipe Cespedes. Santiago, Chile : Banco Central Chile, 2011. p. 427-466 (Series on central banking, analysis, and economic policies; Vol. 17).

Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review

TY - CHAP

T1 - Procyclicality of Fiscal Policy in Emerging Countries

T2 - The Cycle is the Trend

AU - Strawczynski, Michel

AU - Zeira, Joseph

N1 - "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].

PY - 2011

Y1 - 2011

N2 - 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.

AB - 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.

KW - procyclical fiscal policy

KW - emerging countries

KW - cycle is the trend

UR - http://dx.doi.org/10.2139/ssrn.2124456

M3 - Chapter

SN - 9789567421374

SN - 9567421382

T3 - Series on central banking, analysis, and economic policies

SP - 427

EP - 466

BT - Fiscal policy and macroeconomic performance

A2 - Gali , Jordi

A2 - Cespedes, Luis Felipe

PB - Banco Central Chile

CY - Santiago, Chile

ER -

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

Abstract

Publication series

Bibliographical note

UN SDGs

Keywords

Access to Document

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