On Graduation from Fiscal Procyclicality / Jeffrey A. Frankel, Carlos A. Végh, Guillermo Vuletin.

Format:

Book

Author/Creator:

Frankel, Jeffrey A.

Contributor:

National Bureau of Economic Research.

Végh, Carlos A.

Vuletin, Guillermo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17619.

NBER working paper series no. w17619

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

In the past, industrial countries have tended to pursue countercyclical or, at worst, acyclical fiscal policy. In sharp contrast, emerging and developing countries have followed procyclical fiscal policy, thus exacerbating the underlying business cycle. We show that, over the last decade, about a third of the developing world has been able to escape the procyclicality trap and actually become countercyclical. We then focus on the role played by the quality of institutions, which appears to be a key determinant of a country's ability to graduate. We show that, even after controlling for the endogeneity of institutions and other determinants of ...scal procyclicality, there is a causal link running from stronger institutions to less procyclical or more countercyclical fiscal policy.

Notes:

Print version record

November 2011.