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Financial Cycles and Fiscal Cycles

Author

Listed:
  • Agust n S. B n trix

    (Department of Economics, Trinity College Dublin)

  • Philip R. Lane

    (Central Bank of Ireland, Trinity College Dublin and CEPR)

Abstract

There is an extensive literature on the behaviour of fiscal variables vis-a-vis the output cycle. We show that fiscal variables also co-vary with the financial cycle, as captured by fluctuations in the current account balance and credit growth. These financial factors affect fiscal outcomes, over and above their influence on the output cycle. We argue that fiscal surveillance and the design of fiscal rules should pay close attention to the interaction between the financial cycle and the fiscal cycle.

Suggested Citation

  • Agust n S. B n trix & Philip R. Lane, 2015. "Financial Cycles and Fiscal Cycles," Trinity Economics Papers tep0815, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep0815
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    File URL: https://www.tcd.ie/Economics/TEP/2015/TEP0815.pdf
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    Cited by:

    1. Claudio Borio & Marco Jacopo Lombardi & Fabrizio Zampolli, 2016. "Fiscal sustainability and the financial cycle," BIS Working Papers 552, Bank for International Settlements.
    2. Floro, Danvee, 2019. "Testing the predictive ability of house price bubbles for macroeconomic performance: A meta-analytic approach," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 164-181.
    3. Kate Ivory & Eddie Casey & Niall Conroy, 2020. "Ireland’s Fiscal Spending Multipliers," The Economic and Social Review, Economic and Social Studies, vol. 51(1), pages 133-172.
    4. Eddie Casey, 2019. "Inside the "Upside Down": Estimating Ireland's Output Gap," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 5-34.
    5. Carlos Cuerpo & Ángel Cuevas & Enrique M. Quilis, 2018. "Estimating output gap: a beauty contest approach," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(3), pages 275-304, August.

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