In this paper we present a stylised framework of fiscal policy determination that considers both structural targets and cyclical factors. Applying this framework to a sample of 16 OECD countries, we find evidence of significant asymmetry in the reaction of fiscal policy to positive and negative cyclical conditions, with budgetary balances deteriorating in contractions and not improving in expansions. This asymmetry appears to have contributed significantly to debt accumulation. We find no evidence that EU fiscal rules have reduced the ability of governments to conduct stabilisation policy between 1992 and 2000.
No. 531 - Cyclical asymmetry in fiscal policy, debt accumulation and the Treaty of Maastricht
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- No. 531 - Cyclical asymmetry in fiscal policy, debt accumulation and the Treaty of Maastricht pdf 482.0 KB Data pubblicazione: 25 March 2007