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How different are the fiscal policy effects?. Assessing the importance of cyclical situation, policy coordination, composition of policy measures and country-specific features

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  • Matti Viren

Abstract

It is well-known that estimates of fiscal policy effects differ a lot. In this paper we try get some idea of the magnitude of these differences and the underlying reasons for these differences. In the European Monetary Union we face wide cross-country differences in fiscal institutions and key fiscal parameters, some of which may also vary over time (business cycle). Moreover, these effects may also depend on trade spillover effects and thus on the extent of policy coordination. Our empirical analyses make use of data for 15 EU countries, mainly for the period 1970-2011. The results clearly indicate that fiscal multipliers are much larger during economic recessions. By contrast, the policy coordination-effects appear to be more homogenous, although it turns out that small countries may benefit more from coordination. Still, cross-country differences seem to dominate these average features of the results.

Suggested Citation

  • Matti Viren, 2014. "How different are the fiscal policy effects?. Assessing the importance of cyclical situation, policy coordination, composition of policy measures and country-specific features," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 135-157.
    • Handle: RePEc:cai:reofsp:reof_132_0135
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    Cited by:

    1. Marko Crnogorac & Santiago Lago Peñas, 2017. "Cyclical sensitivity of public finances in former Yugoslavian countries (2001–2014)," Working Papers. Collection A: Public economics, governance and decentralization 1701, Universidade de Vigo, GEN - Governance and Economics research Network.

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