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Effectiveness of Fiscal Announcements: Early Evidence from COVID-19

Author

Listed:
  • João Tovar Jalles

    (Universidade de Lisboa
    ISEG, Universidade de Lisboa
    Universidade Nova de Lisboa
    IPAG Business School)

  • Bryn Battersby

    (International Monetary Fund, Fiscal Affairs Department)

  • Rachel Lee

    (International Monetary Fund, European Department)

Abstract

This paper empirically examines the effectiveness of announced government fiscal measures in the context of the COVID-19 pandemic. First, we build a new panel dataset of fiscal announcements by type, such as above-the line, below-the-line, and contingent liabilities for a wide sample of 136 advanced and developing countries between January 2020 and May 2021. Then, using this newly constructed dataset, we show, using both static and dynamic panel analyses, how various types of fiscal announcements affect alternative proxies of economic activity and across different income groups. We also evaluate how these effects vary depending on the country’s initial conditions (degree of public indebtedness or the business cycle positioning). Fiscal announcements also matter in terms of external credibility since they have an effect on government bond spreads. Ultimately, our findings suggest why it might be critical to consider the “news” effect of a fiscal measure by type rather than at the aggregated level.

Suggested Citation

  • João Tovar Jalles & Bryn Battersby & Rachel Lee, 2024. "Effectiveness of Fiscal Announcements: Early Evidence from COVID-19," Open Economies Review, Springer, vol. 35(3), pages 623-658, July.
    • Handle: RePEc:kap:openec:v:35:y:2024:i:3:d:10.1007_s11079-023-09735-4
    DOI: 10.1007/s11079-023-09735-4
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    More about this item

    Keywords

    E6; H3; H8;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H8 - Public Economics - - Miscellaneous Issues

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