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Fiscal policy in the BRICs

Jawadi, Fredj, Mallick, Sushanta K. and Sousa, Ricardo M. (2014) Fiscal policy in the BRICs. Studies in Nonlinear Dynamics and Econometrics, 18 (2). pp. 201-214. ISSN 1081-1826

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Identification Number: 10.1515/snde-2013-0044

Abstract

This paper assesses the macroeconomic impact of fiscal policy shocks for four key emerging market economies - Brazil, Russia, India and China (BRICs) - using a fully simultaneous system of equations. We also estimate fiscal policy rules and analyze the importance of nonlinearity using a smooth transition (STR) model. Drawing on quarterly data, we find that government spending shocks have strong Keynesian effects for this group of countries while, in the case of government revenue shocks, a tax hike is harmful for output. This suggests that there is no evidence in favor of "expansionary fiscal contraction" in the context of emerging economies where spending policies are largely pro-cyclical. Our findings also show that considerations about growth (in the case of China), exchange rate and inflation (for Brazil and Russia) and commodity prices (in India) drive the nonlinear response of fiscal policy to the dynamics of the economy

Item Type: Article
Official URL: http://www.degruyter.com/view/j/snde
Additional Information: © 2014 Walter de Gruyter
Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
JEL classification: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General
Sets: Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 13 May 2014 08:58
Last Modified: 20 Jun 2020 01:52
URI: http://eprints.lse.ac.uk/id/eprint/56745

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