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The determinants of the volatility of fiscal policy discretion

Agnello, Luca and Sousa, Ricardo M. (2014) The determinants of the volatility of fiscal policy discretion. Fiscal Studies, 35 (1). pp. 91-115. ISSN 0143-5671

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Identification Number: 10.1111/j.1475-5890.2014.12024.x


This paper investigates the determinants of the volatility of fiscal policy discretion. Using a linear dynamic panel data model for 113 countries from 1980 to 2006 and a system-GMM estimator, we find that an increase in the number of episodes of government crisis, less democracy and presidentialist systems raise the volatility of the discretionary component of fiscal policy. Additionally, we show that countries with larger populations and less flexible exchange rate systems are more insured against uncertainty about the conduct of fiscal policy. Our results are robust to various regional dummy variables, different subsets of countries and the presence of high inflation and crisis episodes.

Item Type: Article
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Additional Information: © 2014 The Authors Fiscal Studies © 2014 Institute for Fiscal Studies
Divisions: Finance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
Date Deposited: 28 Apr 2014 14:24
Last Modified: 20 Sep 2021 02:53

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